His stunning statement came less than three hours after another Obama nominee also withdrew from consideration, and also over tax problems.
Nancy Killefer, nominated by Obama to be the government's first chief performance officer, said she didn't want her bungling of payroll taxes on her household help to be a distraction.
Obama, Vice President Joe Biden and Daschle's former Democratic colleagues had rallied to his defense in the wake of questions about a series of tax issues.
Last month, Daschle paid $128,203 in back taxes and $11,964 in interest. "Tom made a mistake, which he has openly acknowledged," Obama said. "He has not excused it, nor do I. But that mistake and this decision cannot diminish the many contributions Tom has made to this country."
Daschle also was facing questions about potential conflicts of interests related to the speaking fees he accepted from health care interests. Daschle also provided advice to health insurers and hospitals through his post-Senate work at a law firm.
Daschle was an early supporter of Obama's presidential bid and several of Daschle's former Capitol Hill staffers went to work for Obama after Daschle, then South Dakota senator, lost his re-election bid in 2004.
Daschle filed the amended returns after Obama announced he intended to nominate him as secretary of Health and Human Services.
Daschle explained in his apology letter that the presidential transition team flagged charitable contributions they concluded were deducted in error. When his accountant realized amended tax returns would need to be filed, he suggested addressing another matter that Daschle raised with him earlier in the year: whether the use of a car service provided by a close friend and business associate, Leo Hindery, should be reported as income.
The unreported income for that car service totaled more than $250,000 over three years.
At about the same time, Hindery's company informed Daschle's accountant of a clerical error it made on a form it provided to Daschle that he subsequently reported to the IRS. The error resulted in an additional $88,333 in unreported consulting income for 2007.
"I disclosed this information to the committee voluntarily, and paid the taxes and any interest owed promptly," Daschle wrote. "My mistakes were unintentional."
A financial disclosure form Daschle filed about a week ago shows that he made more than $200,000 in the past two years speaking to members of the health care industry that Obama wants him to reform.
The speaking fees were just a portion of the more than $5.2 million the former senator earned over the last two years as he advised health insurers and hospitals and worked in other industries such as energy and telecommunications, according to a financial statement filed with the Office of Government Ethics.
Among the health care interest groups paying Daschle for speeches were America's Health Insurance Plans, $40,000 for two speeches; CSL Behring, $30,000; the National Association of Boards of Pharmacy, $16,000; and the Principal Life Insurance, $15,000. He reported earnings of more than $2 million from that firm during the past two years.
Daschle also earned more than $2 million in consulting fees from InterMedia Advisors of New York, an investment firm specializing in buyouts and industry consolidation. He said he also intends to resign from that firm upon his confirmation.