In a Supreme Court case, the privacy rights of taxpayers are in jeopardy as the IRS is challenged in its authority to inspect financial documents in third party investigations.

The challenge asks whether an individual, who is not under an IRS investigation, must be notified when financial records and transactions are examined by another taxpayer.

Concerned groups about government accountability claim that the legal battle could have major privacy implications for individuals due to the Biden administration’s plans to increase the IRS.

Devin Watkins (an attorney at the Competitive Enterprise Institute) stated that it is crucial for the IRS to keep its mandate to only focus on those who owe money, and not go through people’s personal records.

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Richard Samp, senior attorney at the New Civil Liberties Alliance said that tax attorneys and civil rights activists are becoming more concerned about the IRS’s tendency to go after third-party records in order to assist it in collecting taxpayer’s information.

Mr. Samp stated that “the government must be able to enforce tax laws to generate the revenue necessary to fund their operation.” “But, the IRS has taken a more assertive position that its attempts to obtain taxpayer information are almost never under threat. This is not the position of the tax law. Courts should ensure that the IRS adheres to all statutory and constitutional limitations on its power.

Two law firms, Abraham & Rose P.L.C. and Jerry R. Abraham P.C. brought the challenge to the high court. They represented Remo Polselli (a delinquent taxpayer) and Hanna Karcho Polselli.

The IRS agent sought bank records for the law firms over a long period of time but failed to notify them. The bank notified the law firms and they moved to stop the summons. The law firms claim that the bank notified them and they moved to halt the summons.

The IRS summoned information from Mr. Polselli to determine the source of his funds for the payment of the law firms. He was wanted by the feds for approximately $2 million.

The IRS must generally give a notice to a third party when it requests records. This is so that the individual can contest the summons.

There are exceptions to the Internal Revenue Code. The IRS doesn’t have to notify a third party if it is seeking records to collect on a judgment that has been rendered against someone.

In June, the Supreme Court heard arguments from lawyers representing the law firms that Congress did not give the IRS the right to seize private records of innocent third parties when it was trying to collect a tax assessment.

In the meantime, the IRS had asked the court to not review the case and said the justices should leave in place the ruling of the lower court, which sided for the tax-collection agency.

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“In order to assist the work of Secretary of the Treasury, the IRS in enforcing Nation’s Revenue laws, ascertaining taxes due and collecting unpaid taxes,” Ms. Prelogar wrote in government brief.

The U.S. The U.S. Circuit Court for the 9th Circuit has, however, ruled against the IRS. In an independent case, the 9th Circuit ruled against the IRS and required that innocent persons be notified when it requests information to assist its investigations and collection efforts.

Due to the split in rulings of lower courts, the Supreme Court announced that it would hear the appeals of the firms.

Four justices voted in favor of the hearing, but no date has been set for oral arguments.

A spokesperson for the Justice Department did no immediate respond to a request.

The $740 billion Inflation Relief Act has been allocated by the Biden administration to the IRS at $80 billion. The IRS plans to increase personnel and resources in order to close the $600 Billion annual gap between taxes collected and levies owed.

Pete Sepp, president and CEO of the National Taxpayers Union Foundation said that the IRS could have a greater reach into the privacy interests of taxpayers and affect their remedies.

“The IRS has the ability to create its own court cases, and it also has more resources to push its positions on many more taxpayers is a troubling combination,” Mr. Sepp stated.

Mike Palicz was the federal affairs manager for Americans for Tax Reform and was critical of IRS due to recent scandals.

“The IRS has repeatedly shown that it cannot be trusted to handle taxpayer information. In an email, Mr. Palicz stated that it has been 555 days since IRS leaked taxpayer information to ProPublica. “It’s been zero answers since IRS leadership selectively leaked taxpayer data to ProPublica.” “The IRS did not want to have this case brought up, as they believe they can easily spy on your bank accounts with impunity.

“This is a positive step for taxpayers who wish to see IRS misuse and abuse of power [reined] into.”

Hanna Karcho Polselli et al. v. Internal Revenue Service.