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Supreme Court: IRS Can Secretly Obtain Bank Records of Taxpayer’s Relatives

S.J. Steinhardt
Published Date:
May 24, 2023


The U.S. Supreme Court has ruled unanimously that the IRS can summon bank information without notifying account holders under appropriate circumstances, Accounting Today reported.

The high court affirmed, in the case of Polselli v. IRS, that Internal Revenue Code Section 7609(c)(2)(D)(i) authorizes the IRS to summon the "person liable for tax," any officer or employee of such person, or any other person it "may deem proper" to produce records that may be relevant to a tax inquiry.

The issue before the court was whether there is an exception to the general rule that notice is not required for summonses issued to third-party record keepers to aid in the collection of tax debt.

The IRS issued administrative summonses to the banks of Hanna Karcho Polselli, the wife of taxpayer Remo Polselli, and of his lawyers. Roselli owed more than $2 million in unpaid tax liabilities, paying some of that tax liability through a limited liability company that he owned. That prompted the IRS to look more closely at his financial records, ultimately issuing summonses to his wife’s bank and to two other banks where his law firm had accounts. The IRS did not notify Hanna Polselli or the lawyers of the summonses. 

In an opinion written by Chief Justice John Roberts Jr., the  Supreme Court rejected Polselli's argument that the exception to the notice requirement applies only if the delinquent taxpayer has a legal interest in the accounts or records summoned by the IRS.

"The findings by the courts in Polselli, which the Supreme Court upheld, make it clear that the IRS does not need to provide notice of a summons that is issued in the aid of the collection of taxes that meet the conditions under the exception in Section 7609(c)(2)(D)(i)," Robbin Caruso of Prager Metis CPAs told Accounting Today.

"These findings are a real wakeup call as to the importance of reading all notices and communications from the IRS, addressing notices timely, obtaining advice from an experienced tax controversy professional, and making certain to avail themselves of all their rights related to tax assessments and judgments," she said. "Most notices have a statutory time limit for response before a taxpayer loses certain rights. For instance, taxpayers generally have 30 days from certain notice dates to file a [collection due process] hearing. If a taxpayer disagrees with an assessment, is seeking the reduction of penalties against them or a collection alternative, they need to take strategic action to protect their rights and mitigate their liabilities as they are working to resolve their tax matters with the IRS." 

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