The tax lien the Internal Revenue Service lodged against Gov. Arnold Schwarzenegger in May resulted from a glitch involving payroll forms for his household employees and a series of certified letters that were returned to sender, according to his business manager.
The manager, Paul Wachter, said today that the confusion that led to the nearly $80,000 lien stemmed from a disparity between the reference number
on Schwarzenegger's federal tax returns and the one on
payroll tax forms for his workers
that were filed with the Social Security Administration.
Schwarzenegger's tax returns used his Social Security Number. The payroll forms used an employer identification number. For some reason, in 2004 and 2005 only, the two federal agencies that received those documents were unable to 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. "The IRS says, or apparently thought, that we hadn't filed the W-2s. So they send us a notification that we haven't filed them."
The amounts the IRS said Schwarzenegger owed were penalties for his supposed failure to file those 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.