IRS 1099-K Notices: has IRS noticed you?

higas-sos-fly-fishing-fly

Remember those pesky 1099-K forms you received earlier this year?  Well, even though IRS gave up on “matching” the income reported on those forms into your business or personal tax returns, they have undertaken something much worse:  a fishing expedition with your name on the bait.

IRS is now sending out four different types of 1099-K notices called “Letters”:

Letter 5035 – a letter hinting that you “may have” underreported your income with no response required.  A shot across the bow.

Letter 5036 – a letter that does more than hint that you have underreported your income – it provides dollar amounts showing that an unusually high percent of your income came from credit cards and 3rd party payers, and demanding a written response in 30 days explaining why you should not file an amended return and which describes your internal controls and cash receipts procedures and other reasons why a high percentage of total gross receipts comes from credit card transactions.

Letter 5039 – a letter which makes the same assertions as Letter 5036 and requires the taxpayer to complete Form 14420 within 30 days to explain why your income reflects an unusually high percentage of credit card and other 3rd party transactions reported on 1099-K.

Letter 5043 – a letter which alleges that compared to others in your industry, you have underreported your income, citing specific percentages and dollar amounts, and demanding a written response within 30 days explaining why you should not file an amended return and which describes your internal controls and cash receipts procedures and other reasons why a high percentage of total gross receipts comes from credit card transactions.

The response-required letters go to the Tax Examiner section of the IRS, so that should give you a clue that if your response is unsatisfactory it is highly likely that an audit will be initiated.

I have a number of concerns about these notices, but my primary one has to do with the fact that the taxpayer is not being notified of an audit.  These 1099-K Letters are an end run around IRS’ obligations to properly inform taxpayers of their rights and duties during an examination, which includes the right to representation.  Taxpayers may blithely respond, or perhaps even ignore these notices without realizing the implications.

Secondly, IRS makes bald-faced assertions in Letter 5043 which allege specific amounts of unreported income, using statistics which are not cited, and which are supposedly based on the industry code used on the tax return.  As we know, these codes are very broad and somewhat outdated, so that your business may be nothing at all like another business using the same catch-all code.  And, where do their statistics come from?  Are they 10 years old or 1 year old?  Knowing how understaffed IRS is, I am going to guess that the statistics used are not recent.

Finally, the whole idea of 1099-K reporting was to tap the underground economy.  That is a very good goal and one that I fully support.  Unfortunately, these 1099-K letters do no such thing.  Instead of matching 1099-K’s into tax returns, the IRS is going after legitimate businesses whose cash receipts model may not fit their idea of the norm.  This approach will have no impact whatsoever on the multitude of eBay sellers, construction contractors, and others who make up a chunk of the underground economy in the U.S.  We need IRS to go back to the drawing board to re-think the 1099-K matching process and come up with a solution that meets the public policy objective from which this requirement originated.

 

 

Mission Impossible? Last Minute Tax Planning for 2013

mission impossible

While the concept of “tax extenders” is debated by economists and policy wonks, the real fact is that certain provisions of our tax code have for years been written with a self-destruct code imbedded in them.  The reasons for this vary, but the main one is that a budget cannot be balanced without plugging in “sunset” dates for some of these more generous provisions of the code – known as “tax expenditures”.

One example of a tax expenditure is the Section 179 “expensing” provision that allows businesses to deduct, rather than depreciate equipment purchases up to a certain threshold.  In 2013, this threshold is, generally, $500,000, but drops to a mere $25,000 in 2014.  The purpose for the high immediate expensing was to give “small” businesses a tax benefit for investing in equipment, providing in theory a stimulating effect on the economy.

If you are in the mood to do last minute tax planning, here is a brief list of some of the more popular 2013 expiring provisions:

Business Provisions:

  • Section 179 deduction – drops to $25,000 from $500,000 after 2103.
  • 50% bonus depreciation – no longer available after 2013 except for certain long-period property and aircraft.
  • Qualified Leasehold Improvements – depreciable life goes to 39 years in 2014, from 15 years.
  • Section 179 deduction for certain qualified real property – the 179 deduction of up to $250,000 for qualified leasehold improvements, restaurant property, and retail property is gone after 2013.
  • Research credit – expires after 2013.

Individual provisions:

  • Direct charitable contributions from an IRA – no longer permitted after 2013.
  • Sales tax deduction – no longer available after 2013.
  • Tuition and fees deduction – expires after 2013.
  • Cancellation of Debt – the exclusion of up to $2 million of COD income from a qualified principal residence is no longer available after 2013.

Of course, Congress could still act in early January to restore some or all of the expiring provisions, as it might do with the unemployment benefits that have now also expired for the long-term unemployed.  To be on the safe side, though, if any of these provision affect you or your business, this might be a good day to do a little shopping.

And remember that each of these provisions, very briefly summarized above, are actually quite complex, so it’s a good idea to check with your tax professional before taking action to make sure that you qualify for the deductions in question.

Heading Toward Tax Season

xena110708As filing season approaches for the 2012 tax year, I am presenting here a few selected tax tips and updates that are often overlooked by traditional tax sources, hopefully brief enough to not induce boredom but complete enough to give you some valuable information:

The 1099 Matching Nightmare Continues

  • 1099-MISC:  Don’t forget to EXCLUDE payments to vendors made with credit cards from your total 1099-MISC payments.  Those payments will get reported to vendors on Form 1099-K.  If you do get 1099s that are wrong, ask the payer to correct the 1099.  If that is a pain, then report the full amount on your tax return, and then back out the erroneous portion somewhere on your expense lines.  And, make sure you can document why the 1099 you received is wrong.
  • 1099-K:  Even though IRS claims it is not now or ever going to match 1099-K payments into your tax returns, there’s a reason you are getting a 1099-K and that is to tap the underground economy by making sure that all businesses are reporting their gross income.  If you report less gross income than is shown on your Form 1099-K you will be subject to IRS inquiry, for which they have developed new notices related to Form 1099-K.  Be sure to provide all Forms 1099-K to your tax preparer so that they can help you avoid receiving these notices.
  • 1099-B:  If you receive broker 1099s related to your investments, you are by now used to receiving corrected 1099s, often long after you have filed your returns.  Due to new basis matching requirements, you will need to seriously consider whether you are better off extending your tax returns while you wait for all the corrections to come through, rather than having to amend your returns later for the corrections, or having to respond to IRS notices.  IRS plans to match all 1099-B reporting on the new Form 8949, first developed in 2011.  There are now 6 different ways to report capital gains and losses, and there are 21 different codes to use when reporting.  Due to the extra time involved, investors should seriously consider consolidating their brokerage accounts in order to save on accounting fees at tax time.

Charitable Contribution Receipts Must Contain Required Language       

Even if you have a “contemporaneous” receipt (one that you have in hand at the time you file your tax returns), it may be defective and result in the complete disallowance of your charitable deductions.  It MUST contain required language concerning whether or not the donor received any goods or services in exchange for a contribution.  If it doesn’t your contribution deduction will be disallowed in full.

W-2 Reminders to include HSA payments and Health Insurance Premiums

Don’t forget to include ALL H.S.A. payments on the W-2 Form, Box 12, not just payments made by employees through a cafeteria plan.  The purpose of this is to make sure that taxpayers are not contributing beyond the maximum amounts allowed in 2012 to their H.S.A. plans.

For 2012, you don’t have to report the value of health insurance premiums on the W-2s if you issue fewer than 251 W-2s.  If issue more than 250 W-2s, you must report the value of the health insurance premiums on Form W-2.  The reporting is “informational only” and is not subject to income or payroll taxes.

City of Portland Business Tax Rental Property Exemption Is Gone, Gone, Gone

If you own a few rental properties in Portland, but have no other business activities you may be blissfully unaware of the long reach of the City of Portland Business Tax.  Beginning in 2012, the City successfully changed its tax code to include ALL rental activity, not just owners with over 9 rental units within the City.  Don’t panic yet:  there’s a new exemption of $20,000 in gross income with 1 or 2 rentals, but you still have to file a special new Form to receive your exemption.  More info is available at the City’s website.  Remember that the City of Portland has its own special version of taxation without representation:  the gross receipts exemption means gross receipts EVERWHERE, including rentals you own in other states and capital gains on ANYTHING except securities, and includes all activities of your spouse if you file jointly, even if your spouse does not live in the City or have any business interests or activities there.

City of Portland School Arts Tax – You owe the City $35

This was the infamous Measure proposed by Mayor Adams which even arts and education groups such as Stand for Children opposed, mainly because only about ½ of the revenue raised will go to fund arts teachers for our public schools.  It did pass, however, so beginning in 2012 a new form is required of EVERY CITY RESIDENT AGE 18 AND OVER, accompanied by a $35 payment, or an exemption request for those below the poverty level.  The City of Portland is administering the tax, and the filing form has not even been developed yet.  However, the city has designated this link which will go live when the forms are ready:   http://www.artstax.net

Taxes in the Twilight Zone

twilight-zone-spiralI love watching Twilight Zone episodes because it is fun to imagine a world where the usual laws of nature are slightly askew and anything becomes possible.  Fanciful minds can do a lot with that.  Yet, some of those episodes are a bit creepy, even scary and sometimes disturbing.

Congress’ failure to act timely to provide any kind of certainty about tax law both for 2012 and for future years has definitely defied the usual laws which govern rational behavior.  Clearly Republican lawmakers would rather tax the poor and middle class than allow taxes to become progressive again on the top 1%, and it is quite clear that they wish to further the shameful increase in wealth and income inequality in the U.S.

Thanks to this failure, we have wandered across the obscure boundaries of normal reality into twilight zone of taxation.  Here is an overview of our current creepy, scary, and disturbing tax system:

Creepy

  • The zero percent tax rate for millionaires.  How is it possible that millionaires could pay no tax even though they have taxable income?  The zero percent rate was carefully crafted by Bush-era policy makers to permit this by allowing ordinary deductions to first offset ordinary income.  If ordinary deductions, such as charitable contributions, mortgage interest, state income taxes and investment management fees offset an investor’s interest income in full, that investor can be in a position to pay zero percent on all capital gain and dividend income up to the bottom of the 15% bracket.  This is up to $70,700 per year (Married Filing Joint) that is being taxed at zero percent.  The rest of us will pay tax on all of our capital gain and dividend income, because we are working for a living, and can’t possibly manipulate our tax bracket to get below the 15% level.  For investors, this is easy to control, through timing of capital gains, and through investment choices such as the use of municipal bonds or non-dividend paying stocks. And, how many working poor do you know that have an investment portfolio?  Creepier still:  Obama’s tax proposal will not impact this bizarre anomaly – the only hope for this provision to die is for us to fall off the fiscal cliff and keep diving.

Scary

  • The Alternative Minimum Tax affecting some 33 million taxpayers this year, compared to 4 million last year.  Thanks to Congress’ failure to enact the annual “AMT patch” – something it has been doing for decades – means that the AMT exemption amount will revert back to its non-inflation-indexed amount.  This is because the original law failed to index the exemption for inflation.  Rather than fix this permanently, Congress continuously “patches” the exemption amount each year by indexing it to inflation for that year only.  This is because actually fixing the AMT would be far too rational, and remember, we are in the Twilight Zone.  So, millions of taxpayers will see dramatic increases in their tax bills for 2012, and it will especially hit those with incomes between $100,000 and $200,000, with an average increase of about $3,000.  Not only that, failure to patch the AMT has caused IRS to delay being able to finalize its tax forms for 2012.  The latest news from the IRS Commissioner is that one hundred million taxpayers will not be able to file their returns until sometime in March of 2013.

Disturbing

  •  Unfair income matching rules which target low income taxpayers, while failing to tax the bulk of the underground economy.  I have always found it interesting that Congress and the IRS have gone to great lengths to make sure that baby sitters, housekeepers, and child care providers report their income and pay their taxes.  Yet, construction contractors are not subject to 1099 requirements when payments to them are non-business related, such as when they are remodeling your house.  In order to claim a child care credit or compensate your nanny, IRS makes sure that everything gets reported on a W-2 or is otherwise matched to the worker’s tax return.  Also, they are hell-bent on making sure that restaurant servers report their tips.  Why don’t we have these same kinds of requirements for plumbers, builders, and construction contractors.  Ever wonder about how construction workers can be paid “under the table?”  It might be because the contractors themselves are not reporting their income, so paying someone under the table becomes a piece of cake.  Most industry observers are well aware of this kind of outrageous noncompliance, but nothing has been proposed to tax what is probably a huge portion of the underground economy.  I’m not just picking on contractors, though.  A legitimate tax system is one in which all income is taxed, not just the income of the poor and working class.

Fixing variances in general and subsidiary ledgers – Accounting NOT for Dummies

There can be many causes for a subsidiary ledger to go out of balance with the general ledger.  An invoice could have been posted in an incorrect amount, a general journal entry could have been made to correct the general ledger, or a payment could have been posted using a journal entry rather than using the payables or receivables “modules.”

One example from my world of public accounting involves corrections made by the CPA firm at year end which also affect subsidiary ledgers.  For example, as part of year-end tax closing the CPA firm makes an adjustment to accounts payable to correct the balance to the actual payables at year end, which for whatever reason were misstated.  Let’s say the adjustment is a debit of $1,000 to an A/P account, which brings the balance to the new corrected amount of $9,000.  Prior to the adjustment, the subsidiary ledger shows a balance of $10,000.  In this example, we’ll say that the adjustment relates to only one vendor – ABC Corp. – and that it relates to a mis-posted invoice for COGS.

When the journal entry is posted to the general ledger, here is what happens, using T accounts, where the left side of the “T” is a debit, and the right side a credit:

A/P                                                              COGS                                             ABC Corp A/P sub

$1,0000 |   $10,000                           $10,000 | $1,000                                     | $10,000

Above, you can see that the journal entry has corrected the general ledger, but the subsidiary ledger is now out of balance to the general ledger.

I have developed a procedure, using a “dummy cash account” to fix the problem and bring the accounts back into balance.  First, set up a new cash account and call it “dummy cash” or something similar so that everyone knows it’s not a real account.  Then open vendor payables and select ABC Corp.  Now, make a $1,000 payment to ABC Corp using the dummy cash account, not your real bank account.

Here is what has happened:

A/P                                        COGS                             ABC Corp A/P sub   Dummy Cash

$1,0000 |   $10,000     $10,000| $1,000       $1,000 | $10,000              |$1,000

$1,000|

Now, you can see that Accounts Payable is understated by $1,000 and the dummy cash account has a credit of $1,000.  So, you must make one more journal entry to correct both of these accounts, making a credit to A/P and a debit to dummy cash.

A/P                                         COGS                                ABC Corp A/P sub   Dummy Cash

$1,0000 |   $10,000      $10,000| $1,000     $1,000 | $10,000  $1,000|$1,000

$1,000    |   $1,000

                                                                                                                                                                 

              | $9,000        $9,000|                              |$9,000                   -0-

As you can see, now all is right with the world.  The accounts payable general ledger agrees to the subsidiary ledger, the vendor balance is correctly stated, and COGS has the correct amount of expense.  This same process works in reverse for corrections needed to Accounts Receivable and its subsidiary ledger.

You can use debit memos and credits memos to achieve the same result, as long as you can control where the debit/credit memos post to.  You want them to post right back to the G/L account where you are making the correction.  Some software does not permit you to make entries to accounts payable and accounts receivable in this manner, but here is how that would work, using the above example:

Open up ABC Corp and issue a credit memo to the vendor for $1,000.  Set up the credit memo to post directly to Accounts Payable.  When posted, the credit memo will both debit and credit A/P in the amount of $1,000, so it will have no effect on the A/P balance, and the sub-ledger for ABC Corp. will reflect the $1,000 credit memo, so it will now be in agreement with the general ledger.

Accounting Software Set-Up: If It Was Easy, You Did It Wrong

Setting up accounting software and getting it working properly for your business or non-profit organization can earn you a badge of honor.  Or, it can be stumbling block for  bookkeepers, accountants, and CFO’s.

Who should perform the set up and conversion?  Should you run dual systems during the conversion?  Should you ditch your old chart of accounts and start over?  Are you dreading entering in your customer and vendor data bases? Did you budget enough time and money for the conversion?  Or maybe you don’t even know where to start.

I am offering these tips which are based on experience with all kinds and sizes of businesses and non-profit organizations.

Use a checklist

I can’t tell you how important it is to have a roadmap for an accounting system conversion.  Where can you get one?  You can start with the checklist provided by the accounting software manufacturer.  You can ask your CPA for one.  You can go on-line and find one.  Or, you can develop one yourself, a method that I think is best.  However, any checklist is better than no checklist.

Map out a timeline and budget

Do not plan a software conversion during your busy seasons.  Schedule it for the slow times.  Can you import your old data into your new software?  If not, and if you are going to lose your historical data (which these days you should be able to avoid), then you’ll probably need to do the conversion at year end, which may unfortunately also coincide with your busy times.  And, it will probably cost more in time and money than you have in your budget.

Build the bones of the system:  your chart of accounts

The most important detail to attend to is what to do about your chart of accounts.  It needs to be the right size and have the right level of detail.  But how do you know what this is?  A chart of accounts is meant to group your assets, liabilities, equity, income and expenses by broad, commonly accepted categories so that anyone looking at your trial balance can instantly understand the categories used and make meaningful comparisons to other entities.  For example, it is not common practice to have separate general ledger accounts for each employee’s cell phones.  Instead, common practice is to use a general ledger account called “Communications Expense” or “Telephone expense.”  Here is a good overview from Wikipedia.

While there can be an architecture to the chart of accounts, it needs to follow a logical pattern.  If you are going to use departments you need to decide whether you are grouping cost centers or revenue centers.  Revenue centers are true divisions of a company or NPO – both income and expenses are tracked by location, program, or function.  Cost centers involve only tracking costs of a department or function, and not the revenue.  Fund accounting can be even trickier:  if you are using sub-codes to track restricted funds, you can’t use these same codes to track spending by grants.  While a restricted grant may be a sub-set of temporarily restricted net assets, the inverse is not true.   It’s best to think through your architecture before implementation by drawing it out on a piece of paper.

Non-profit organizations have the most complex charts of accounts relative to their size because they are required to report to outside grantors, contributors and governments in ways not required by for profit entities.  Remember:  the more complex your chart of accounts, the longer it will take your bookkeeper to post even “simple” transactions, because each item of income and expense will need multiple sub-codes attached to it.

That is why it is sometimes it is simply not cost effective to try to build an elaborate and integrated chart of accounts that satisfies these requirements.  It can be easier and less time consuming to reserve grant reporting and fund tracking to an off the books solution such as Excel, especially for smaller organizations with limited resources.

Set up your data bases for customers and vendors

Hopefully, you’ll be able to import your customer and vendor data bases from your old software.  But, if not, you’ll need to input all of your vendors and customers names, addresses, and other information into the software, prior to using it.  These data bases form the platform for the accounts payable and accounts receivable subsidiary ledgers.  In some software programs, incorrectly identifying a customer as a vendor, and vice versa, can cause you to lose valuable historical information about that customer or vendor, so it is critical to get these data bases set up in advance, and not input them “on the fly” even though this will be tempting.  You’ll notice that I’ve said nothing about setting up employees.   This is because I rarely recommend that a company or NPO run its own payroll.  A service bureau should be employed to do that for you – it is more efficient, less expensive, and exposes you to far less risk of errors and penalties.  However, you will need to develop a posting journal/process, and you’ll also need controls over the payroll input and output from the service bureau. 

Ready, set, go

Once you’ve got your historical balances, beginning balances and budget information into the chart of accounts, you are ready to start using the system.  Many CPAs recommend using parallel systems for at least the 1st month, but I think that is optional.  As long as you have put in adequate controls and reconciliation processes, you should be able to have confidence in the new system right away.  These controls typically include:  month end bank reconciliations for all bank accounts, month end reconciliations to all subsidiary ledgers (accounts receivable, accounts payable and payroll, typically), daily or weekly management oversight of data entry, user passwords, and control over system access.  Setting up controls is not necessarily intuitive, so it’s usually a good idea to get your accounting firm involved in helping you with this portion of the transition.  Then, you’ll need to train your managers on the new controls and how to implement them.  And lastly, make sure your backup procedures have been tested and are working well – another very important control that is often overlooked.

Why the Portland/Multnomah County Business Tax Needs Reform

Mayor Sam Adams recently announced a tax amnesty for scofflaws who have so far succeeded in not rendering unto the City/County what they owe in business income taxes.  While I am not a big fan of amnesty programs, as they reward the wrong behavior and the wrong taxpayers, it is not surprising that businesses and property owners who have “nexus” within the City/County find themselves out of compliance with the tax code.  Some do so deliberately, while others may simply be blissfully unaware of their tax obligations.

This is because the City/County tax code, unlike its counterparts among other municipalities, taxes only certain businesses and individuals.  It relies on a very narrow tax base, and thus has an extremely high flat rate of 3.65%.  It is essentially a payroll tax on successful business owners, and an income/capital gains tax on successful property owners.

But more importantly, the tax punishes privately held companies who do business within City/County borders while rewarding public companies doing the same.  How can this be?  Well, here’s a real life example from my CPA practice:  Locally owned company with 3 shareholders, nets $4 million before owner salaries, and $1 million after owner salaries.  In my example, none of the shareholders actually live within the City/County boundaries.  What is their City of Portland/Multnomah County Business Tax?   The total tab will be $136,500.  If this same business were to be bought out by a publicly traded company, and management salaries were the same, the business would now have a tab of $36,500.  In this example, that’s a $100,000 punishment for the locally owned company.  Outrageous, no?

This strange phenomenon takes place because wages over $87,000 paid to more than 5% owners are “added back” to business net income to determine the tax.  Basically, you have a payroll tax on owners who pay themselves more than $87,000 per year, a tax that is not paid by companies who do not have more than 5% owners.

Further, the filing requirements imposed by the City are highly invasive (and perhaps illegal?).  Taxpayers who owe no tax whatsoever to the City/County are still required to provide copies of their individual tax returns, along with related Schedules C, D, and E, even though they have no income to report.  The TriMet tax, administered by the State of Oregon has no such requirements.  If you don’t owe the tax, you simply don’t file.

But, this is not so with the City/County.  I have clients who fear their personal financial details are now sitting on some City employee’s desk, and that information that is required by federal law to be kept in strict confidence is being exposed to those who have no need (or right?) to see such information.

But worst of all, the City/County tax is neither a fair tax nor a simple tax.  It relies on a narrow tax base (unfair) and it is one of the most complex and arcane municipal tax codes I have ever encountered.  A fairer and simpler tax would be a payroll tax/self-employment tax similar to the TriMet tax.  It could have a very low rate because of its broad tax base, and would be extremely simple to administer by simply tacking it on to the Oregon quarterly OQ filing. 

A broader tax base would also help to discourage local businesses from the practice of fleeing the City/County boundaries to escape the tax.  Regardless of what City leaders may say about this practice, every CPA I know has experience with clients who have relocated out of the City/County boundaries to avoid the tax.

In the meantime, if you own property or do business within the City/County borders and have not been filing your tax returns, now is the time to find out if the amnesty program can help you get into compliance.

Update June 20, 2012:  This just in from my tax law reporting service: 

“Oregon—Income Tax: Portland Confidentiality Provision Amended

Portland has amended its provision regarding confidentiality of business license tax taxpayers to provide that, in addition to existing prohibitions, it is unlawful for any Portland employee, agent, or elected official or any person who has acquired information to divulge, release, or make known in any manner identifying information about any taxpayer applying for tax amnesty, unless otherwise required by law. Ordinance No. 185312, City of Portland, effective May 9, 2012″

So, what is the penalty for unlawfully disclosing taxpayer information?  From the City Code: 

“7.02.730 Criminal Penalties for Violation of the Business License Law by City Employee or Agent.Printable Version
Anyone knowingly violating Section 7.02.230 may be punished, upon conviction thereof, by a fine not exceeding $500.00 or by imprisonment for a period not exceeding six (6) months, or by both fine and imprisonment.  Any City employee that is convicted will be dismissed from employment and is ineligible for holding any position of employment or office in the City for a period of five (5) years thereafter.  Any agent of the City that is convicted is ineligible for participation in any City contract for a period of five (5) years thereafter.”

Contrast this to the penalty on IRS employees for unlawful disclosure of federal tax information (which is the same information the City employees have about its licensees): 

“Penalties for Unauthorized Disclosure-Internal Revenue Code

Internal Revenue Code Sections 7213 and 7431 describe the penalties for unauthorized disclosure of federal information.

Under Section 7213 of the Internal Revenue Code, a governmental actor’s unauthorized disclosure is a felony that may be punishable by a $5,000 fine, five years imprisonment or both. Under Section 7213A of the Internal Revenue Code, the unauthorized inspection of federal tax information is punishable by a $1,000 fine, one year imprisonment or both. Section 7431 of the Internal Revenue Code permits a taxpayer to bring suit for civil damages in a U.S. District Court, including punitive damages in cases of willful disclosure or gross negligence, as well as the cost of the action.”

As you can see, City employees are subject to far less punishment than IRS employees who unlawfully disclose the exact same confidential information.