The IRS Starts 2025 With a Bang by Requesting Two Different John Doe Summonses

Happy New Year!!

With a new administration, one party controlling the House and Senate, potentially a new IRS Commissioner, and likely a reduction in IRS enforcement funding, there has been a great deal of chatter regarding the impact on IRS enforcement in 2025 and beyond. However, someone forgot to tell the IRS because in the last few weeks, two courts have authorized the IRS to issue John Doe summonses to third parties, requesting taxpayer information. One case is related to payments in the gig economy and the other is requesting information related to allegedly undisclosed offshore transactions.

A John Doe summons is a tool used by the IRS to obtain information about taxpayers the IRS believes may not be properly reporting information on their tax returns or otherwise not complying with the tax laws. It is called a “John Doe” summons because the IRS does not know the identity of the taxpayers for whom the IRS is seeking information. A federal district court can authorize the IRS to serve a John Doe summons after an ex parte proceeding in which the IRS establishes that:

1. The summons relates to a particular person or class of persons;
2. The IRS has a reasonable basis for believing that the person or class of persons has failed to comply with one or more provisions of the internal revenue laws; and
3. The information sought is not readily available from other sources.

Additionally, the summons must be “narrowly tailored to information that pertains to the failure” of the person or class of persons to comply with the internal revenue laws.

On December 20, 2024, the U.S. District Court for the Central District of California authorized the IRS to serve a John Doe summons on JustAnswer, a digital question-answering service. On December 10, 2024, the government filed a petition in the U.S. District Court for the Central District of California requesting authorization to serve a John Doe summons on JustAnswer LLC for the identities and payment activity of any expert who was paid $5,000 or more for answering questions on JustAnswer, a digital question-answer service, for any one year from 2017-2020. According to the government petition, JustAnswer is a digital platform through which members pay to have questions answered by professionals such as doctors, lawyers, veterinarians, engineers and tax professionals. Customers are charged a fee to join the platform plus a per-question fee or a monthly subscription fee. JustAnswer pays a portion of the customer fees to the experts answering the questions and retains the rest. Experts are paid on a per-question-answered basis and also receive bonuses paid by JustAnswer as part of an incentive program. In support of the petition, the government included a declaration from IRS Agent John Wood, which referenced five different taxpayers who had been paid by JustAnswer but had failed to include the payments in their income. On December 20th, 2024, the court found that there was a reasonable basis for believing that the experts paid by JustAnswer LLC to answer subscribers’ questions were not complying with the tax laws and authorized the issuance of the John Doe Summons on JustAnswer LLC. In a December 26, 2024, press release, the Department of Justice Tax Division said “[t]he gig economy has grown in recent years and with it, the concern for tax compliance issues has increased. This John Doe summons demonstrates that working with the IRS we will use all the tools available to us to ensure that no matter how U.S. taxpayers earn income, they are properly reporting it and paying their taxes.”

On December 23, 2024, the U.S. District Court for the Southern District of New York authorized the IRS to issue John Doe summonses targeting U.S. taxpayers who may have used the services of Trident Trust Group or related entities to conceal foreign assets or income. The summonses will be served on U.S.-based delivery services, financial institutions, clearinghouses and Nevis Services Limited, a U.S. affiliate of Trident. The summonses are seeking records related to U.S. taxpayers who utilized Trident and its affiliates to establish or manage (1) foreign financial accounts or other financial assets, (2) foreign corporations, companies, trusts, foundations or other entities, or (3) assets held in the names of such entities. In support of the petition, the government referenced nine U.S. taxpayers who used Trident’s services who disclosed their non-compliance through the IRS’s Offshore Voluntary Disclosure Program between 2010 and 2014.

If you have any questions regarding this or any other tax issue, please feel free to contact me a 214-749-2456.