Timothy Geithner, Obama's choice to lead the economic rescue effort, admits underpaying his taxes earlier this decade in what Obama transition officials described as a common mistake. He has paid more than $48,000 in back taxes and interest since the mistakes turned up.
Senate Democrats on Tuesday dismissed the matter as a minor bump in the road for Geithner, whose confirmation process had been going smoothly. The Obama camp reiterated the president-elect's support for Geithner after the meeting, and Finance Committee Chairman Sen. Max Baucus (D-Mont.) called for his confirmation hearing to go forward Friday.
Republicans did not speculate on whether the concerns were enough to disqualify Geithner. Sen. Orrin Hatch (R- Utah), a committee member, said Geithner still had his support.
"We have just learned about these allegations and the Finance Committee's investigation," said Don Stewart, an aide to Senate Minority Leader Mitch McConnell of Kentucky. "The committee is the appropriate place to review these allegations."
Last week Obama's choice for commerce secretary, New Mexico Gov. Bill Richardson, withdrew from consideration after questions arose about an investigation involving a state contract negotiated during his administration.
Questions about household hiring have derailed past nominations, notably Zoe Baird, President Bill Clinton's 1993 choice for attorney general, who hired illegal immigrants as household employees and did not pay Social Security taxes for them.
Geithner's tax errors came to light in early December when the Obama transition team disclosed them to the Finance Committee staff, according to committee documents. The nominee discussed the matter with staffers later in the month.
After Republicans began raising questions this week, Geithner and the Obama team shifted quickly into response mode.
On Tuesday, Geithner requested a meeting with committee members.
Geithner told lawmakers he made a "common mistake" on his tax returns while serving as an official of the International Monetary Fund from 2001 to 2003, according to a transition official. He paid all of the taxes on his income, he said, but erred on his self-employment taxes.
Under the IMF payroll system, Geithner was considered self-employed, the transition office said. The IMF did not withhold federal and state taxes for its employees.
The IRS audited Geithner in 2006 for tax years 2003 and 2004, according to the committee's documents. That resulted in additional taxes of about $15,000, but the IRS waived penalties for those years.
Geithner paid most of his past-due taxes shortly before Obama nominated him in November, committee documents show. He had paid some in 2006, but the Obama transition team discovered more was due.
Geithner told senators he didn't know he owed those taxes. Likewise, he said he was unaware his part-time housekeeper's work documents were no longer valid during the final three months of her employment.
Obama's spokesman said the president-elect stands by his nominee.