The IRS Can Get 3rd Party Data on Americans Without Permission

The IRS Can Get 3rd Party Data on Americans Without Permission

( – There is a constant battle between the government and the people over how much information the former is allowed to gather against the latter and how they go about getting their hands on it. This is especially true when it comes to the Internal Revenue Service (IRS), and a recent decision by the Supreme Court of the United States (SCOTUS) sheds some light on where they say certain lines should be drawn.

Hunting for Money

Bucking some recent trends, Chief Justice John Roberts delivered the unanimous 9-0 decision in Polselli v. IRS, which addresses who needs to be notified when the tax man is searching for someone’s assets. In the case at hand, Remo Polselli was legally determined by the IRS to owe them more than $2 million in unpaid taxes, and they leveled an official assessment against him for that amount.

An IRS employee, called a Revenue Officer, was given the job of collecting the money and began sifting through financial documents relating to Remo Polselli and a very tangled network of enterprises that he is associated with. According to the facts as laid out in Chief Justice Roberts’ ruling, the investigator knew that almost $300,000 of what he owed came out of the business account “owned by Dolce Hotel Management, LLC,” and concluded that he would have control over its money.

The officer was also looking into accounts belonging to Polselli’s wife, Hanna, and he issued a summons for documents to the law firm of Abraham & Rose, where Polselli was a long-time client. The attorneys replied that they did not have any such records, at which point the IRS investigator sent summonses to Wells Fargo, J.P. Morgan Chase, and Bank of America looking for bank statements and other documentation for Hanna Polselli, the hotel management firm, and the law firm. This is where things get complicated.

Under federal law, the IRS is typically required to provide notice to people and corporate entities when they are checking with third-party sources such as banks so that those being investigated have the ability to ask a court to make sure their rights are protected. There are exceptions to that, and the investigating officer believed this situation qualified and so did not send out any notices. However, the banks contacted their clients about the orders, who then went to court to try to stop them.

First, the District Court and then the Sixth Circuit Court of Appeals ruled against Hanna Polselli and the lawyers, who then appealed to SCOTUS, which took up the case because the Seventh and Tenth Circuits ruled the same way on cases like this, but the Ninth Circuit did not. Even on matters that are not of earthshaking magnitude, a split on the law among lower courts can cause confusion, and so the justices will take up the matter.

The Polsellis and their tax attorneys argued that the exception only applies when the debtor themselves had an interest or stake in the accounts in question. The IRS contended that applying that interpretation would allow an unscrupulous party to move assets to avoid their seizure. SCOTUS decided that the conditions in this case warranted the government’s actions but kept protections in place so that other people’s information that might be in the pile of data provided by the banks could not be used as a springboard to open investigations into them.

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