Arnold Schwarzenegger in tax trouble?

Last week, TMZ.com posted a copy of a tax lien filed on May 11 against California governor Arnold Schwarzenegger for nearly $80,000. That was news to the actor-turned governor and his office. According to Schwarzenegger's representatives, TMZ's story was the first he'd heard of it.

 

The IRS lien – which was filed with the Los Angeles County Recorder's office – says Schwarzenegger owes $29,047 for tax year 2004 and another $40,016 for 2005.

 

The governor's spokesman, Aaron McLear, was very clear with reporters, explaining that it was not a matter of Schwarzenegger failing to pay his taxes... it was a "paperwork tracking discrepancy."

 

"The governor had not been notified of any discrepancy or of the lien until today," McLear said in a statement the day after Thanksgiving. "[He] is resubmitting certain information to the IRS and we fully expect that the matter will be resolved and the lien expunged without any penalty assessed upon the governor."

 

McLear added, this issue is "completely unrelated to the payment of taxes, which the governor has paid in full and on time."

 

A code number listed on the tax lien – code 6721 -- indicates that the problems arose from information returns, such as W2 or 1099 forms. To clarify, the San Jose Mercury News asked Bay Area tax attorney Jeffrey Kahn to weigh in. Kahn explained that, based on the lien code, it appears there has been a reporting error related to payroll taxes withheld from employee pay. If Schwarzenegger and a group of partners were involved in a particular business, he and each other partner would be listed as a "responsible person." In the case of a tax lien against the entity, a lien would be filed against each of the designated agents of the business. That, says Kahn, would explain why Schwarzenegger was unaware of the lien.

 

"It's not as much a smoking gun as somebody would think," Kahn said. "This is a lot more abstract and obscure" than something involving the governor's income tax returns, for example.

 

Schwarzenegger has been listed as an agent or officer of more than a dozen businesses or not-for profits. Records indicate that two of those entities have faced state or county liens in the past, for far smaller sums than the federal lien. Those issues were long ago resolved.

 

IRS spokesman Dean Patterson said the IRS would not comment on individual cases.