How Recent Supreme Court Rulings Can Affect Your Pocket

The U.S. Supreme Court building in Washington, on June 7, 2023. Madalina Vasiliu/The Epoch Times

The U.S. Supreme Court is always busy making decisions that affect many people. Rulings made in recent days will impact a lot more with regard to their personal finances. Three of these decisions could affect many more people, particularly those with bank accounts, past-due mortgage payments, and student loans.

Permission Is Not Needed to Look at Your Bank Records

In the Supreme Court case Polselli v. IRS involving $2 million owed to the Internal Revenue Service (IRS), the tax agency summoned the banks holding Remo Polselli’s accounts for bank account information. They owed $2 million in back taxes, but were never informed about the investigation and sued the IRS when they discovered it.

The IRS won the lawsuit, enabling the agency to spy on people’s finances. Its power now goes beyond getting the bank records of those who owe money, and can now can also spy on people who owe back taxes, including your family members, friends, and associates.

Because of this ruling, avoiding the possibility of having the IRS spy on your bank accounts is probably no longer possible, but if you make your tax payments on time, it is less likely. Avoiding people you know that owe back taxes may also help. Remember that the IRS has been given $60 billion in new funds to hire new agents to help enforce tax law—and some of them will be contacting banks for information when needed.

The New Student Loan-Repayment System

President Joe Biden’s plan to replace the one rejected by the Supreme Court could bring reduced payments for many—or complete forgiveness. The initial plan was declared illegal because the executive branch does not have the authority to do it.

The new program offered by President Biden is called Saving on a Valuable Education, or SAVE. According to NPR, the program will raise the base income level (“the floor”) at which repayments will need to start.

The current programs require people making more than 150 percent of the poverty level to make payments. The new program raises it to 225 percent of the poverty level: singles making less than $32,805 per year and families of four making less than $67,500 do not need to pay anything. Many of these people were overlooked by the current system, which had not kept accurate records, and should have already stopped making payments.

Another change that borrowers will be glad to hear is that the rules have changed for the good concerning interest on student loans. The SAVE plan stops all interest from accumulating as long as monthly payments continue. Payments undergraduates make will be reduced to 5 percent instead of the current 10 percent of the student’s excess income.

The Department of Education says that as many as 804,000 borrowers can expect to be able to forego making future payments. The biggest reason so many people will get loan forgiveness, CNBC says, is because the system failed to keep track of when people had made payments for 20 years—at which time the balance should have been already forgiven under the programs the borrowers signed under.

The Department of Education says it will notify borrowers soon as to which people will have their student loan balance forgiven. Applicants to the SAVE program should be able to apply later this summer.

Although the initial plan by President Biden to forgive more than 40 million borrowers has failed, people still owing money can expect to restart their loan payments this fall. Some details of your student loan may have changed, so be sure to know who your loan servicer is, what your payments will be, and what balances you have remaining.

The End of Home-Equity Theft

In another case, the Supreme Court settled a case where a 94-year-old woman claimed that the county sold her home for a tax debt of $15,000. The home was sold for $40,000, and the Minnesota County Hennepin kept the balance of $25,000. The case revealed that it is a common practice in 14 states, and in some situations, the local government regularly takes the balance. Most states will return it to the property owner.

The Supreme Court, according to the CATO Institute, unanimously declared this practice unconstitutional based on the Fifth Amendment. It prevents private property from being taken without some type of just compensation.

The argument offered by the county was that the U.S. Constitution does not define “private property.” A local law said that in the case of tax foreclosures, the remaining equity belonged to the local government.

The Supreme Court also looked at historical decisions on this issue. It stated that similar cases in England, the Magna Carta, and tradition in America all backed up the idea that only the amount that was due in taxes could be taken from the owner.

The Supreme Court’s decision puts an end to the practice of home-equity theft and should make some people less fearful of losing all value in their homes if they fall behind in their taxes. If that is your situation, the IRS offers some possible solutions, including installment plans, an offer-in-compromise, penalty abatement, and more.

You may also be able to get help when you fall behind with state and local taxes. The federal government provides information that can direct you where to go when you need help. The sooner you contact the correct agencies, the better off you will be. Demonstrating that you have sought help may help reduce any penalties that may apply. Ignoring the situation and doing nothing will get you into more trouble.

The Epoch Times Copyright © 2023 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.