IRS Third-Party Administrative Summonses vs. the Right to Privacy: The Case of Barter Exchanges

Pursuant to its tax-collecting duty, the Internal Revenue Service (IRS) has the power to issue summonses requiring taxpayers and third parties to appear and produce books, papers, records, and documents. Internal Revenue Code section 7609 contains protective notice and intervention provisions that protect the privacy of named target taxpayers. Summonses that do not identify the target taxpayer, however, are subject only to the less vigorous John Doe summons requirements. Barter exchanges have become a recent target of IRS John Doe summonses, creating problems for barter exchange members and other unnamed taxpayer targets. This Note examines the summons power of the IRS under the Internal Revenue Code as amended in 1982, as well as the judicial limitations imposed in United States v. Powell and subsequent cases. The Note focuses on how the IRS uses its summons power to investigate the tax liability of barter exchanges and their members, and how the fourth and fifth amendment rights of barter exchanges and their members are affected. The Note proposes reforms that would reconcile the conflicting goals of protecting taxpayers\u27 privacy interests and permitting the IRS to perform its duty of collecting taxes