IRS to face the Supreme Court over summons power

IRS to face the Supreme Court over summons power
Reuters April 22, 2014

The Internal Revenue Service will go before the U.S. Supreme Court on Wednesday to defend the way it enforces its power to issue legal summonses to obtain sensitive documents from taxpayers who refuse to cooperate with audits.
The IRS is squaring off against Michael Clarke, a West Palm Beach, Florida, investor who is arguing that the U.S. tax agency in 2011 improperly issued a summons “as retribution” against him and his business partners for resisting an audit.
At issue is what legal standards taxpayers must meet to get a court hearing if they think the IRS has issued a summons for an improper purpose. Clarke maintains he should have gotten a hearing, while the IRS says such hearings are unnecessary.
Clarke maintains, according to court filings, that the IRS should have to explain its summons intentions at an evidentiary hearing before a court order is approved by a judge.
But the IRS argues that Clarke does not need a hearing because taxpayers already have the legal rights to challenge a summons.
Taxpayers cannot “engage in a fishing expedition about the motives of IRS agents,” the government said in court documents, adding that a win for Clarke would bog down tax enforcement with another layer of litigation.
A lawyer for Clarke declined to make his client available for comment. The IRS also declined to comment.
Clarke’s ‘Catch-22′
Multinational businesses that do battle with the IRS over taxation regularly will be watching the Clarke case to see if the agency’s summons power can be checked, tax lawyers said.
Under the law, the IRS can issue a summons for information when a taxpayer refuses to provide it voluntarily. If the taxpayer ignores the summons, the IRS can then ask the U.S. Justice Department to seek a court order from a judge.
Judges routinely rubber-stamp requests for court orders to enforce summonses without first holding evidentiary hearings.

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