Careless People

Clarice Feldman and Rosslyn Smith
The latest member of the Obama administration to have a problem with the IRS is Capricia Penavic Marshall, the nominee for the post of chief of protocol for the State Department.  Ms. Marshall and her husband, a cardiologist,  did not file tax returns for 2005 and 2006 until after she was being considered for a position in the administration in November 2008.

In her written answers and in accounts she gave to government officials, Ms. Marshall has said the errors were unintentional. She has said that her husband failed to recognize that the couple's accountant had included the tax returns for 2005 in a binder he provided with copies of the returns, and that the actual paperwork was never mailed.

The failure to file the 2006 return is being blamed on a problem at the Washington DC post office.  According to the date provided to the Senate, the returns in question showed refunds of $37,259.  This is substantially different from the case of Tim Geithner, Tom Daschle and Kathleen Sebelius where the returns in question omitted employment taxes, understated income or took deductions for with the taxpayers were not legally eligible.  

Some commentators have asked why the Marshall's were not penalized for filing so late,  The answer is they very probably were.  The statute of limitations for the IRS to issue a refund in the case of a non filer is only two years from the missed due date. Thus there was a 100% penalty for failing to file the 2005 return, originally due on April 15, 2006, if it wasn't filed until November 2008 as the IRS pocketed the Marshall's refund.  State law tends to follow the federal in such matters, so the Marshall's probably forfeited their District of Columbia refund, too.  

The two year SOL make it in the IRS's interest not to pursue late returns from people with a history of over-withholding.  Over the years I had to prepare returns for a lot of people who hadn't filed for several years.  (The most common reason to stop filing was the aftermath of a divorce.)  They'd be upset to learn they couldn't claim a refund for most years in which they had overwithheld because of the SOL.  This was especially true if they also owed tax on one or two returns from several years back  as the 25% failure to pay and 25%  failure to file penalties plus interest assessed on the balance due really pile up. 

Somehow not receving tax refunds in an amount that is close to the median annual income of a full time American worker escaped the Marshall's attention for two years.   In my professional life I ususally referred to couple like this as belonging to the world of the MMTB set, as in more money than brains. They may be sharp in one particular area that captures and holds their focus but they often carelessly walk around in a cloud of blissful ignorance on matters that are of a great concern to most of the rest of us.   

The protocol chief customarily helps plan events for visiting leaders and helps oversee protocol matters for the president and vice president abroad.

It is to be hoped that the above duties capture and hold Ms. Marshall's interest more than managing the family finances do.  Given the sorry record of the Obama administration in selecting appropriate gifts for this nation's allies, focus is desperately needed in this area.
The latest member of the Obama administration to have a problem with the IRS is Capricia Penavic Marshall, the nominee for the post of chief of protocol for the State Department.  Ms. Marshall and her husband, a cardiologist,  did not file tax returns for 2005 and 2006 until after she was being considered for a position in the administration in November 2008.

In her written answers and in accounts she gave to government officials, Ms. Marshall has said the errors were unintentional. She has said that her husband failed to recognize that the couple's accountant had included the tax returns for 2005 in a binder he provided with copies of the returns, and that the actual paperwork was never mailed.

The failure to file the 2006 return is being blamed on a problem at the Washington DC post office.  According to the date provided to the Senate, the returns in question showed refunds of $37,259.  This is substantially different from the case of Tim Geithner, Tom Daschle and Kathleen Sebelius where the returns in question omitted employment taxes, understated income or took deductions for with the taxpayers were not legally eligible.  

Some commentators have asked why the Marshall's were not penalized for filing so late,  The answer is they very probably were.  The statute of limitations for the IRS to issue a refund in the case of a non filer is only two years from the missed due date. Thus there was a 100% penalty for failing to file the 2005 return, originally due on April 15, 2006, if it wasn't filed until November 2008 as the IRS pocketed the Marshall's refund.  State law tends to follow the federal in such matters, so the Marshall's probably forfeited their District of Columbia refund, too.  

The two year SOL make it in the IRS's interest not to pursue late returns from people with a history of over-withholding.  Over the years I had to prepare returns for a lot of people who hadn't filed for several years.  (The most common reason to stop filing was the aftermath of a divorce.)  They'd be upset to learn they couldn't claim a refund for most years in which they had overwithheld because of the SOL.  This was especially true if they also owed tax on one or two returns from several years back  as the 25% failure to pay and 25%  failure to file penalties plus interest assessed on the balance due really pile up. 

Somehow not receving tax refunds in an amount that is close to the median annual income of a full time American worker escaped the Marshall's attention for two years.   In my professional life I ususally referred to couple like this as belonging to the world of the MMTB set, as in more money than brains. They may be sharp in one particular area that captures and holds their focus but they often carelessly walk around in a cloud of blissful ignorance on matters that are of a great concern to most of the rest of us.   

The protocol chief customarily helps plan events for visiting leaders and helps oversee protocol matters for the president and vice president abroad.

It is to be hoped that the above duties capture and hold Ms. Marshall's interest more than managing the family finances do.  Given the sorry record of the Obama administration in selecting appropriate gifts for this nation's allies, focus is desperately needed in this area.