Supreme Court To Make Urgent IRS Ruling

( )- This week, the Supreme Court heard arguments in a case that revolves around whether the IRS has to give notice as it’s accessing people’s bank records during a probe of a delinquent taxpayer’s assets – and if so, when it has to do so.

The plaintiffs in the case have asked the high court to limit the reach of the IRS. The Biden administration, meanwhile, is embarking on efforts to beef up the operations of the tax agency by using Congress-appropriated funds to increase staff.

The specific legal challenge in question is about whether people who aren’t the subject of an IRS probe have to receive notice any time their financial dealings and records are reviewed as part of an investigation into another taxpayer.

A lawyer working for the federal government in the case argued that the agency needs this flexibility so it can investigate potential accounts a taxpayer who’s delinquent could be using to avoid having to pay taxes.

Ephraim McDowell, who serves as an assistant to the U.S. Solicitor General, said:

“Congress wanted the IRS to have some latitude.”

At the hearing, he argued that Congress specifically drafted laws about the IRS so that people’s privacy would be protected. At the same time, these laws were written in a way that would allow the federal agency to receive prompt collection of taxes that are due.

This case was brought before the Supreme Court by one delinquent taxpayer, Remo Polselli as well as his wife, Hanna Karcho Polselli. They are represented by two law firms in the case – Jerry R. Abraham PC and Abraham & Rose PLC.

An agent with the IRS looked to access the bank records of the two law firms over a period of multiple years. In doing so, he didn’t provide notice to the firms about what he was doing.

The bank notified the law firms, which then worked hard to stop the summons from being in effect. The law firms have argued that what the IRS has done in this instance violates the privacy interests of the firm as well as other clients that they have who aren’t related to the Polsellis.

The IRS is seeking about $2 million from Polselli, and they wanted to find out what the source was for him to be able to pay the law firms to represent him.

In most cases, the IRS has to give notice to any third party when it wants to obtain records. This allows that individual or entity to protest the particular summons the tax agency issues.

There are some exceptions that are included in the Internal Revenue Code, though. One such exception is any time an individual has a judgment rendered against them. In these cases, the IRS isn’t required to notify third parties if it’s seeking any record that might be in connection to them collecting on that judgment.

In this case, McDowell argued that there was a close association among the taxpayer, the two law firms and his wife. As a result, they weren’t required to provide proper notice.