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Schwarzenegger’s business manager blames tax lien on communication, mail glitches

November 30, 2009 |  5:37 pm

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.

The governor and his aides were not aware of the problem, or of the lien, until it was reported on TMZ.com on Friday. The governor's accountants say the lien is likely to be wiped away when the situation is cleared up.

In this case at least, Arnold Schwarzenegger the celebrity politician got a small lesson in what it is like to be Arnold Schwarzenegger the taxpayer, tangled up in a system even larger than the one he runs.

"Every one of us gets caught up with little problems in the DMV or other bureaucracies," Wachter said. "It's just the way the world is, and it's no one's fault."

-- Michael Rothfeld in Sacramento