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Supreme Court Allows IRS to Access Third-Party Bank Records without Notice

Payam Javan: In a unanimous decision, the Supreme Court ruled in favor of the Internal Revenue Service (IRS), stating that the agency has the right to secretly request the bank records of third parties in cases involving delinquent taxpayers. The court acknowledged that it is not necessary to alert individuals who are not the primary focus of the investigation when the IRS seeks financial documents related to another person’s tax omission. Critics argue that this ruling grants the IRS broad authority to access the financial records of individuals only remotely connected to a delinquent taxpayer.

The decision serves as a victory for the Biden administration, which has been working to enhance IRS enforcement activities. The administration secured approximately $80 billion through the Inflation Reduction Act, signed into law in August 2022, to hire an additional 87,000 IRS agents. Republicans have expressed concerns that these funds could be misused to harass taxpayers, while Democrats argue that the IRS has long suffered from inadequate funding.

The case that led to the Supreme Court’s ruling involved Remo Polselli, a taxpayer with outstanding taxes amounting to $2 million. Polselli’s wife, Hanna Polselli, challenged the IRS’s request for her bank data without prior notice. During oral arguments, the justices showed sympathy towards her position while acknowledging the government’s need for efficient tools to collect overdue payments. The Biden administration contends that notifying third parties in such cases would provide defaulting taxpayers with a chance to hide assets, and individuals can still challenge any suspected abuses through the court system.

The decision has raised concerns among critics, including the Institute for Justice, a nonprofit legal firm that submitted a brief in support of Polselli. They worry about the potential implications and urge vigilance in safeguarding individuals’ privacy rights in future IRS investigations.

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