In Polselli v. Internal Revenue Service, the nation’s highest court last month unanimously sided with the IRS, reaffirming the tax authority’s right to request documents or financial data from parties connected to a delinquent taxpayer without informing such parties.
According to analysts, the ruling strengthened the tax agency’s ability to keep information secret and provides the IRS too much power with too few restrictions on how that information can be used.
Unveiling the IRS’s Expansive Power
In his court brief, Judge Ketanji Brown Jackson used a dry cleaner as an example to show the possible reach of this rule.
“Imagine a non compliant taxpayer who frequently uses a mom-and-pop dry cleaner. Without even informing the business owners, the IRS may call the dry cleaner’s bank for years’ worth of financial statements if it thought the dry cleaner’s financial records could aid in tax collection,”according to Judge Ketanji Brown Jackson.
The shop owners in this situation have no recourse but to comply with the collection request.
Read more: FDA Clears The Path For Neuralink Brain Chip Implantation In Humans
Information Sharing in Polselli v. Internal Revenue Service
The extent to which the IRS may use the material it has gathered was not made clear in the judgment.
Experts fear that the IRS may use the identical request as the basis for another case, despite the court’s ruling that the agency can only use the summons against the individual named in the summons.
Ordinary bank records are not privileged information, despite the fact that he did mention that the IRS had measures in place to prohibit the transfer of information from one case to another.
A taxpayer who owed the IRS $2 million in past taxes and penalties, was suspected of hiding assets beneath his company ventures by an IRS agent, who thought he was doing so. Remo Polselli was the catalyst for the entire event.
The officer made an effort to get records from Polselli’s law firm, where he has long been a client, including invoices, billing statements, canceled checks, and wire transfers.
Read more: President Joe Biden Kansas City Chiefs Visit Goes Awry With The ‘Oldest Trick In The Book