The U.S. Supreme Court has been getting a lot of attention lately. That could be partly due to the overturning of Roe v. Wade last summer and, more recently, reports of some justices receiving expensive gifts and trips. However, there are also new influential decisions from the Court, some of which directly affect the finances and bank accounts of millions of people.
Recent Supreme Court Rulings That Impact Your Finances
Here's what you should know about three particular rulings that can impact your personal finances — from property taxes and home equity to student loans and the privacy of your financial records.
#1. The IRS Can Look at Your Bank Account
In a case called Polselli v. IRS, the Supreme Court ruled that the IRS can sometimes secretly probe bank records without notice to taxpayers. Under an existing statute, the IRS can also — without notice — request and examine bank records of people who don't owe it money, like friends, family, and associates of a taxpayer who does owe the IRS.
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What happened in the case? As Kiplinger reported, the dispute in the Polselli case began when a taxpayer owed more than $2 million to the IRS. The agency issued summonses to J.P. Morgan Chase, Bank of America, and Wells Fargo (banks of Polselli’s wife and law firm) but failed to notify Polselli's wife or law firm that it was trying to obtain their banking information. As a result, Polselli's wife and the law firm sued the IRS, claiming they should have been notified of the agency's probe of their financial information.
How can Polselli v. IRS impact your finances?
- Your bank and financial records may not be as private as you believe.
- Sensitive financial information belonging not only to you if you owe taxes, but to loved ones and associates, could be accessible to the IRS without your prior knowledge.
The case serves as a reminder to pay the IRS if you owe taxes as soon as you can or to consider entering into an installment agreement or negotiating an offer in compromise.
#2. 'Home Equity Theft' Violates the Constitution
In a case called Tyler v. Hennepin County, the Supreme Court ruled that a practice sometimes called “home equity theft” violates the U.S. Constitution. Basically, a state cannot pocket any excess home equity/profit if it takes and sells your home to pay your past due property taxes.
What happened in the case? As Kiplinger previously reported, Geraldine Tyler's Minnesota condo was sold at auction for $40,000 after she failed to pay $15,000 in property taxes. She had lived in the condo for over 10 years before moving to a senior assisted living community. Tyler sued the county for keeping the surplus home equity from the sale of her home, arguing that the action violated the Fifth Amendment and was an excessive fine. The county argued that it followed state law and that Tyler didn't have a property interest in her home equity.
How can Tyler v. Hennepin County impact your finances?
- It's still important to pay property taxes on time or seek assistance if you cannot pay.
- But this Supreme Court ruling should prevent a state or locality from keeping the excess profit if they seize and sell your home to cover unpaid property taxes.
The Pacific Legal Foundation says that the practice of “home equity theft” has affected over 8,950 homes, resulting in $860 million in losses for U.S. homeowners.
#3. The Supreme Court Student Loan Decision
The Supreme Court ruled in a case called Biden v. Nebraska that President Biden did not have the power under the HEROES Act, to forgive federal student loans on a large scale, up to $20,000 for eligible borrowers, as proposed in the President's program.
What happened in the case? The Court considered two cases brought against Biden’s student loan forgiveness. (One case was dismissed by the Supreme Court, and the other was upheld.) Critics argued that without congressional approval, President Biden lacked the power to implement nearly $500 billion in federal student loan forgiveness and that the program would harm some states and loan servicers, creating unfair benefits.
The Biden administration planned to forgive federal student loans under the HEROES Act, citing pandemic hardships for borrowers. According to government data cited by the Biden administration, most borrowers who would have benefited make less than $75,000 a year. However, the Supreme Court ruled that the Biden administration didn't have the authority, without congressional approval, to enact sweeping student loan forgiveness.
How can Biden v. Nebraska impact your finances?
- Because student loan forgiveness cannot go forward as planned, over 40 million borrowers hoping for relief will be facing repayment without the Biden forgiveness factoring into their federal student loan balances.
- The Department of Education is offering several new programs to help reduce the burden on some borrowers, so be sure to check StudentAid.gov for information.
- However, no matter what the Supreme Court decided, federal student loan payments were (and still are) set to resume this fall.
Make a plan to begin making your student loan payments again if you haven’t already. Also, double-check the details of your existing loan(s) to be sure about servicer and contact information, payment amounts, and balances due.
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