Most people assume that if the IRS wants their bank records, they will at least be told. Usually that is true. When the IRS issues a summons to a third party, IRC § 7609(a)(1) generally requires notice to anyone identified in it, and that person can move to quash. But there is an exception for collection, and in Polselli v. IRS the Supreme Court read it broadly.
The Facts
Remo Polselli underpaid his federal taxes for multiple years between 2005 and 2017. The IRS assessed more than $2 million in taxes and penalties against him. Revenue Officer Michael Bryant was assigned to collect.
Bryant developed leads. He focused on bank accounts of Polselli's wife, Hanna Karcho Polselli. He knew Polselli had paid nearly $300,000 toward his taxes from an account owned by Dolce Hotel Management, LLC, and suspected Polselli controlled that company's money. He first summoned records from Abraham & Rose, PLC, a law firm Polselli had long used. The firm said it did not retain the documents.
Bryant then issued summonses to Wells Fargo for records of Mrs. Polselli and Dolce Hotel Management, and to JP Morgan Chase and Bank of America for bank statements relating to Polselli, the law firm and Jerry R. Abraham, P.C. He gave none of those third parties notice. The banks did. Mrs. Polselli and the law firm parties moved to quash in federal court in Michigan.
The District Court dismissed for lack of jurisdiction, because a motion to quash is available only to people entitled to notice. The Sixth Circuit affirmed over a dissent. The Ninth Circuit had adopted a different rule, requiring that the delinquent taxpayer have some legal interest in the summoned records before the no-notice exception applied.
The Issue
Does the collection exception to the notice requirement apply only when the delinquent taxpayer has a legal interest in the accounts or records the IRS summons?
The Holding
No. Chief Justice Roberts wrote for a unanimous Court: "A straightforward reading of the statutory text supplies a ready answer: The notice exception does not contain such a limitation." Justice Jackson, joined by Justice Gorsuch, concurred.
The Reasoning
Three conditions, none about legal interest
Section 7609(c)(2)(D)(i) excuses notice for a summons "issued in aid of the collection of ... an assessment made or judgment rendered against the person with respect to whose liability the summons is issued." The Court read that as three conditions. The summons must be issued in aid of collection. It must aid collection of an assessment or judgment. And the assessment or judgment must be against the same person whose liability the summons concerns. Nothing in those words requires the taxpayer to own or have an interest in the summoned records.
Congress knew how to say "interest"
The very next section of the Code, § 7610, which was enacted in the same 1976 law, denies reimbursement of summons compliance costs when the taxpayer "has a proprietary interest in" the records. Congress used interest language there and left it out of the notice exception. The Court assumed that choice was deliberate.
"In aid of" means help, not certainty
The petitioners argued a summons only aids collection if it targets an account the IRS could actually seize. The Court disagreed: "to 'aid' means '[t]o help' or 'assist.'" A summons that will not itself reveal collectible assets can still help find them. Records showing that Dolce Hotel Management paid Polselli's bills could lead the IRS to collect from that company as an alter ego, or point to other places assets were parked. The Court compared it to a detective ordering forensic tests that will not solve the crime on their own.
The second exception still has work to do
The petitioners argued the broad reading made the next clause, covering transferees and fiduciaries, pointless. The Court found two differences. Clause (i) requires an assessment or judgment, while clause (ii) applies to a liability that may not yet be assessed. And clause (i) concerns the taxpayer, while clause (ii) concerns transferees and fiduciaries. Each clause covers situations the other does not.
What the Court left open
The Court acknowledged concerns about the reach of the IRS summons power and said it was not defining "the precise contours" of "in aid of the collection." It answered only the question presented: no legal interest requirement.
What It Means for Taxpayers Today
Assessment changes the rules
The Court drew a clear line between two stages. When the IRS is determining whether you owe, a third-party summons generally requires notice to people identified in it. Once the tax is assessed and the IRS is collecting, notice may not be required at all. That shift happens quietly, the day the assessment posts.
Family and business associates are exposed
If you owe assessed taxes and a revenue officer believes you are using a spouse's account, a business, or a professional's trust account to move money, the IRS can summon those records without telling the account owners. They may find out only because the bank chooses to tell them, as happened here. After Polselli, they generally cannot go to court to quash.
This is how nominee and alter ego cases get built
Summoned records are often the first step toward a nominee lien or an alter ego levy, the theories that let the IRS reach property titled to someone else. You can see where those cases end up in G. M. Leasing Corp. v. United States and Drye v. United States.
Where the summons power comes from
The Court reminded readers how broad the underlying power is. Under IRC § 7602(a), the IRS may summon books, papers, records and other data, both to determine a taxpayer's liability and to collect it, and the summons can reach "any person" with relevant information, not just the taxpayer. Section 7609 adds the notice and motion to quash safeguards for third-party summonses. Polselli narrows those safeguards in the collection setting. It does not change what the IRS can ask for in the first place.
The practical lesson
Do not run your money through other people's accounts when you owe the IRS. It does not hide anything, it drags people you care about into the investigation, and it can turn a civil collection case into something much worse. If you have an assessed balance and a revenue officer assigned, the better path is a complete and honest collection information statement and a real resolution. Our article on dealing with a revenue officer explains how those cases tend to unfold.
If you are the third party
Not every summons falls within the exception. The IRS still needs an assessment or judgment against the person whose liability the summons concerns, and the summons must be in aid of collecting it. The Court left the outer limits of "in aid of" for another day. If you receive notice of a summons from a bank and you are not the taxpayer, talk to counsel quickly about whether the exception actually applies.
The Bottom Line
Polselli confirms that once the IRS is collecting an assessed tax, its summons power reaches the financial records of people around the taxpayer, often without notice and without a chance to object first. The Court opened its opinion with an old joke about paying taxes with a smile. The IRS does not take smiles. It takes records, and after Polselli, it can take them from almost anyone who might help it find the money.