It is extremely important to keep in mind the full strength of the US government against the citizens, and in this case, the authority of the IRS to access information without submitting summonses for collection purposes. The IRS can access bank information (banks), credit card statements (banks or financial institutions), and probably point of sale systems for those cloud based (even if the 1099K is released at year end).

The article mentions ” The U.S. Supreme Court held unanimously that the IRS does not have to notify third parties named in a summons when it seeks access to records held at institutions such as banks in aid of collection of an assessment.

The IRS gets already information submitted by different parties at least at year end, such us w2s from the employers (payroll processing companies), 1099s NEC/Misc from businesses/contractors, 1099 interest/dividend/brokerage from financial institutions, 1098 Tuition from educational institutions, 1099 Mortgage interest from mortgage companies or bank, and the list go on and on.

If there is an IRS investigation / audit or similar procedure, our professional advice is that you should not go alone and you should seek representation with an adequate professional such as Enrolled Agents, Certified Public Accountants or Lawyers. Being honest, provide additional data that might not be considered by tax authorities and give the background or explanation for your case might reduce the tax liabilities, remove penalties or get approval for debt tools like an “offer in compromise”. By the point you are aware of the investigation, the IRS agents have already prepared the case, organized the supporting documentation and generated an estimated tax liability calculation (or at least, they have it in their heads).

Article from Journal of Accountancy – Supreme Court upholds exception to notice requirement for third-party summonses