The Internal Revenue Service

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Introduction

The Internal Revenue Service (IRS) is an agency of the United States Department of the Treasury responsible for collecting taxes and administering the Internal Revenue Code. The IRS was created to collect taxes, enforce laws, and help American citizens understand the tax system better.

What is the Internal Revenue Service?

The Internal Revenue Service (IRS) is an independent federal agency within the Department of the Treasury tasked with collecting taxes and enforcing tax law. The IRS has a commissioner, who the President appoints with Senate consent. The IRS headquarters is in Washington, DC; however, it has offices throughout the country to assist taxpayers and audit tax returns.

The IRS uses several collection tools to collect outstanding amounts owed on individual income tax accounts, such as liens or levies placed against property owned by debtors. Automatic assessments are made when criteria are met (such as filing extensions or missing required payments). Seizing bank balances and wage garnishments from bank accounts belonging to non-compliant taxpayers.

The History of the Internal Revenue Service

The Internal Revenue Service was created in 1862 by Abraham Lincoln during the Civil War to collect taxes on alcohol and tobacco. The IRS was initially called the Bureau of Internal Revenue (BIR) until 1894, when its name was changed to the Internal Revenue Service (IRS) with the signing of the Wilson tariff act. The Wilson tariff act established a new income tax and income tax division within the IRS. But in 1895, the Supreme Court ruled the new income tax unconstitutional because a direct tax and not apportioned among states based on population.

In 1913 however, Congress ratified the 16th Amendment. The Amendment stated, “Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.” The first 1040 form was introduced in 1913 as well.

George S. Boutwell, the first commissioner of the Internal Revenue Service

The Agency

The Internal Revenue Service has a commissioner, who the President appoints with the consent of the Senate. The commissioner is responsible for administering the tax laws.

The IRS also has a deputy commissioner who oversees operations in five functional areas:

  • Taxpayer services.
  • Returns processing.
  • Audits.
  • Collections.
  • Business systems modernization

Collection and Audits of taxes

  • The IRS collects taxes through withholding, estimated tax payments, and tax returns.
  • The IRS audits returns to ensure compliance with federal tax laws.
  • Penalties and interest may be imposed for non-compliance with federal tax laws.
  • Tax breaks and credits are available to help offset some of the cost of complying with federal income tax laws.

Enforces and Oversees tax law

The IRS enforces and oversees tax law. It protects taxpayer rights, safeguards taxpayer information, and aids taxpayers. The IRS also educates the public about its tax responsibilities through partnerships with taxpayers, state governments, and other organizations.

The organization of the Internal Revenue Service is as follows:

  • Commissioner of Internal Revenue
  • Taxpayer Advocate Service (TAS)
  • Small Business/Self-Employed Division (SB/SE)
  • Large Business & International Division (LB&I)
  • Criminal Investigation Division (CI)

Conclusion

The Internal Revenue Service is responsible for collecting taxes and enforcing the tax code. The IRS accomplishes its mission by operating in two ways: enforcement and administration. Enforcement involves the collection of taxes from individuals and businesses that have failed to pay them. At the same time, administration refers to actions taken on your behalf, such as filing returns and processing refunds or payments due to the taxpayer.

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