IRS Says It Violated Its Own Code By ARTHUR H. ROTSTEIN, Associated Press Writer

TUCSON, Ariz. (AP) -- The Internal Revenue Service violated its own code and the federal Privacy Act by improperly disclosing tax data on 1,391 taxpayers to an accountant, agency officials said Tuesday. The agency has apologized to the taxpayers and offered compensation.

As a result of the error, the agency could be liable for at least $1.3 million in penalties, said Jodi Patterson, an IRS spokeswoman.

The mistake was discovered last fall after certified public accountant William Wewee, a former IRS employee, requested tax return information for 50 clients fearful of the so-called Y2K bug. The IRS sent him information on 1,391 taxpayers, including their names, Social Security numbers, tax liabilities and taxable income, Wewee said.

''I knew they had just broken the law,'' he said.

Wewee reported the violation to the IRS and the Treasury Department. He also contacted a number of those whose information he was sent and is looking into a possible class action.

Treasury Department officials declined to comment on their investigation. Calls to an assistant U.S. Attorney in Tucson also investigating were not returned.

IRS district director James Walsh in Phoenix sent out 1,300 letters of apology April 7, providing information about suing, discussing penalties for wrongful disclosure and offering administrative awards of $1,000 per violation. Under IRS code, a judge could award damages of $1,000 or actual damages above $1,000. Since the awards offered are administrative, a judge's approval is not necessary.

''It's not a legal settlement,'' Patterson said. ''We're offering this relief because they're entitled to it and it is the right thing to do. But it absolutely does not preclude them from suing for violation or for seeking punitive damages as well.''

About 100 people have accepted the award, she said.

AP-NY-04-18-00 2004EDT< 

http://www.newsdirectory.com/go/?r=cur&u=www.newsday.com/ap/topnewsx.htm

-- Martin Thompson (mthom1927@aol.com), April 18, 2000