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Schwarzenegger's business manager blames tax lien on glitch

The California governor's business manager says confusion involving payroll filings and undelivered mail led to the IRS lien for nearly $80,000.

December 01, 2009|By Michael Rothfeld

Reporting from Sacramento — For much of his life, Arnold Schwarzenegger the celebrity has lived above the fray, immune to the little annoyances most other people face.

But over the last few days, Arnold Schwarzenegger the taxpayer ran headlong into two of them -- the IRS and the post office -- in what his business manager said was a snafu involving payroll tax filings and undelivered mail.

The nearly $80,000 federal tax lien the Internal Revenue Service lodged against the governor of California in May resulted from confusion caused by a disparity between the reference number used on his personal tax returns and the one on the payroll tax forms for his household employees that were filed with the Social Security Administration, according to his business manager, Paul Wachter.

Schwarzenegger's tax returns used his Social Security number. The payroll forms used an employer identification number.

For some reason, in 2004 and 2005, the two federal agencies that received those documents did not recognize that the forms were filed by the same taxpayer.

"There seems to be this computer glitch that somehow the IRS and the Social Security Administration don't realize that it's the same person filing the different forms," Wachter said. "And the IRS says, or apparently thought, that we hadn't filed the W-2s."

The amounts the IRS said Schwarzenegger owed were penalties for what it believed was his failure to file payroll tax forms.

In another odd twist, Wachter said, IRS warning notices were sent to the governor's home instead of to his business office or to his accountants, where his mail normally goes.

But the post office is under instructions not to deliver mail to the governor's home.

So the notices went back to the IRS, which -- unable to reach this delinquent taxpayer named Arnold Schwarzenegger -- filed a lien against his property.

The governor's accountants say the lien probably will be wiped away when the situation is cleared up.


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