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The Internal Revenue Service (IRS) is the
revenue service A revenue service, revenue agency or taxation authority is a government agency responsible for the intake of government revenue, including taxes and sometimes non-tax revenue. Depending on the jurisdiction, revenue services may be charged with ta ...
for the
United States federal government The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States The United States of America (USA), commonly known as the United States (U.S. or US), or Ameri ...
, which is responsible for collecting taxes and administering the
Internal Revenue Code The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large The ''United States Sta ...

Internal Revenue Code
, the main body of the federal statutory tax law. It is part of the
Department of the Treasury Department may refer to: * Departmentalization, division of a larger organization into parts with specific responsibility Government and military *Department (country subdivision), a geographical and administrative division within a country, for e ...
and led by the
Commissioner of Internal Revenue The Commissioner of Internal Revenue is the head of the Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service of the United States federal government responsible for collecting taxes and administering the Inte ...
, who is appointed to a five-year term by the President of the United States. The duties of the IRS include providing tax assistance to taxpayers; pursuing and resolving instances of erroneous or fraudulent tax filings; and overseeing various benefits programs, including the
Affordable Care Act The Affordable Care Act (ACA), formally known as the Patient Protection and Affordable Care Act, and colloquially known as Obamacare, is a United States U.S. federal law, federal statute enacted by the 111th United States Congress and signed i ...
. The IRS originates from the Commissioner of Internal Revenue, a federal office created in 1862 to assess the nation's first
income tax An income tax is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelate ...
to fund the
American Civil War The American Civil War (also known by other names Other most often refers to: * Other (philosophy), a concept in psychology and philosophy Other or The Other may also refer to: Books * The Other (Tryon novel), ''The Other'' (Tryon nove ...
. The temporary measure provided over a fifth of the Union's war expenses before being allowed to expire a decade later. In 1913, the Sixteenth Amendment to the U.S. Constitution was ratified authorizing Congress to impose a tax on income, and the Bureau of Internal Revenue was established. In 1953, the agency was renamed the Internal Revenue Service, and in subsequent decades underwent numerous reforms and reorganizations, most significantly in the 1990s. Since its establishment, the IRS has been responsible for collecting most of the revenue needed to fund the federal government, albeit while facing periodic controversy and opposition over its methods, constitutionality, and the principle of taxation generally. In recent years the agency has struggled with budget cuts and reduced morale. As of 2018, it saw a 15 percent reduction in its workforce, including a decline of more than 25 percent of its enforcement staff. Nevertheless, during the 2017 fiscal year, the agency processed more than 245 million tax returns.


History


American Civil War (1861–65)

In July 1862, during the
American Civil War The American Civil War (also known by other names Other most often refers to: * Other (philosophy), a concept in psychology and philosophy Other or The Other may also refer to: Books * The Other (Tryon novel), ''The Other'' (Tryon nove ...
,
President President most commonly refers to: *President (corporate title) A president is a leader of an organization, company, community, club, trade union, university or other group. The relationship between a president and a Chief Executive Officer, chi ...

President
Abraham Lincoln Abraham Lincoln (; February 12, 1809 – April 15, 1865) was an American statesman and lawyer who served as the 16th president of the United States The president of the United States (POTUS) is the head of state and head of governme ...

Abraham Lincoln
and
Congress Congresses are formal meetings of the representatives of different countries A country is a distinct territorial body or political entity A polity is an identifiable political entity—any group of people who have a collective identity, ...

Congress
passed the
Revenue Act of 1862 The Revenue Act of 1862 (July 1, 1862, Ch. 119, ), was a bill the United States Congress passed to help fund the American Civil War. President Abraham Lincoln signed the act into law on July 1, 1862. The act established the office of the Commission ...
, creating the office of Commissioner of Internal Revenue and enacting a temporary
income tax An income tax is a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a group of Interaction, interacting or interrelate ...
to pay war expenses. The Revenue Act of 1862 was passed as an emergency and temporary war-time tax. It copied a relatively new British system of income taxation, instead of trade and property taxation. The first income tax was passed in 1862: *The initial rate was 3% on income over $800, which exempted most wage-earners. *In 1862 the rate was 3% on income between $600 and $10,000, and 5% on income over $10,000. By the end of the war, 10% of Union households had paid some form of income tax, and the Union raised 21% of its war revenue through income taxes.


Post Civil War, Reconstruction, and popular tax reform (1866–1913)

After the Civil War,
Reconstruction Reconstruction may refer to: Politics, history, and sociology *Reconstruction (law), the transfer of a company's (or several companies') business to a new company *''Perestroika'' (Russian for "reconstruction"), a late 20th century Soviet Union ...
, railroads, and transforming the North and South war machines towards peacetime required public funding. However, in 1872, seven years after the war, lawmakers allowed the temporary Civil War income tax to expire. Income taxes evolved, but in 1894 the
Supreme Court A supreme court is the highest court A court is any person or institution, often as a government institution, with the authority to Adjudication, adjudicate legal disputes between Party (law), parties and carry out the administration of just ...

Supreme Court
declared the Income Tax of 1894 unconstitutional in '' Pollock v. Farmers' Loan & Trust Co.'', a decision that contradicted '' Hylton v. United States''. The federal government scrambled to raise money. In 1906, with the election of President
Theodore Roosevelt Theodore Roosevelt Jr. ( ; October 27, 1858 – January 6, 1919), often referred to as Teddy or his initials T. R., was an American politician, statesman, conservationist, naturalist, historian, and writer who served as the 26th president o ...

Theodore Roosevelt
, and later his successor
William Howard Taft William Howard Taft (September 15, 1857March 8, 1930) was the 27th president of the United States The president of the United States (POTUS) is the and of the . The president directs the of the and is the of the . The power of ...

William Howard Taft
, the United States saw a
populist Populism refers to a range of political stances that emphasise the idea of "the people" and often juxtapose this group against "the elite". The term developed in the 19th century and has been applied to various politicians, parties, and moveme ...

populist
movement for tax reform. This movement culminated during then-candidate
Woodrow Wilson Thomas Woodrow Wilson (December 28, 1856February 3, 1924) was an American politician and academic who served as the 28th president of the United States The president of the United States (POTUS) is the head of state and head of gove ...

Woodrow Wilson
's election of 1912 and in February 1913, the ratification of the
Sixteenth Amendment to the United States Constitution The Sixteenth Amendment (Amendment XVI) to the United States Constitution allows United States Congress, Congress to levy an income tax without apportioning it among U.S. state, the states on the basis of population. It was passed by Congress ...
: This granted Congress the specific power to impose an income tax without regard to apportionment among the states by population. By February 1913, 36 states had ratified the change to the Constitution. It was further ratified by six more states by March. Of the 48 states at the time, 42 ratified it. Connecticut, Rhode Island, and Utah rejected the amendment; Pennsylvania, Virginia, and Florida did not take up the issue.


Post 16th Amendment (1913–present)

Though the constitutional amendment to allow the Federal government to collect income taxes was proposed by
President Taft
President Taft
in 1909, the 16th Amendment was not ratified until 1913, just before the start of the
First World War World War I, often abbreviated as WWI or WW1, also known as the First World War or the Great War, was a global war A world war is "a war War is an intense armed conflict between states State may refer to: Arts, entertainmen ...

First World War
. In 1913 the first edition of the 1040 form was introduced. A copy of the very first IRS 1040 form, can be found at the IRS website showing that only those with annual incomes of at least $3,000 () were instructed to file the income tax return. In the first year after the ratification of the 16th Amendment, no taxes were collected. Instead, taxpayers simply completed the form and the IRS checked the form for accuracy. The IRS's workload jumped by ten-fold, triggering a massive restructuring. Professional tax collectors began to replace a system of "patronage" appointments. The IRS doubled its staff but was still processing 1917 returns in 1919. Income tax raised much of the money required to finance the war effort; in 1918 a new Revenue Act established a top tax rate of 77%. In 1919 the IRS was tasked with enforcement of laws relating to prohibition of alcohol sales and manufacture; this was transferred to the jurisdiction of the Department of Justice in 1930. After repeal in 1933, the IRS resumed collection of taxes on beverage alcohol. The alcohol, tobacco and firearms activities of the bureau were segregated into the
Bureau of Alcohol, Tobacco, Firearms and Explosives The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is a federal law enforcement organization within the United States Department of Justice The United States Department of Justice (DOJ), also known as the Justice Department, is a ...
in 1972. A new tax act was passed in 1942 as the United States entered the
Second World War World War II or the Second World War, often abbreviated as WWII or WW2, was a global war A world war is "a war War is an intense armed conflict between states State may refer to: Arts, entertainment, and media Literatur ...
. This act included a special wartime surcharge. The number of American citizens who paid income tax increased from about four million in 1939 to more than forty-two million by 1945. In 1952, after a series of politically damaging incidents of
tax evasion Tax evasion is an illegal attempt to defeat the imposition of taxes A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law Law is a system A system is a g ...
and bribery among its own employees, the Bureau of Internal Revenue was reorganized under a plan put forward by
President Truman Harry S. Truman (May 8, 1884 – December 26, 1972) was the 33rd president of the United States The president of the United States (POTUS) is the head of state and head of government of the United States of America. The president directs ...

President Truman
, with the approval of Congress. The reorganization decentralized many functions to new district offices which replaced the collector's offices. Civil service directors were appointed to replace the politically appointed collectors of the Bureau of Internal Revenue. Not long after, the Bureau was renamed the Internal Revenue Service. In 1954 the filing deadline was moved from March 15 to April 15. The
Tax Reform Act of 1969The Tax Reform Act of 1969 () was a United States The United States of America (USA), commonly known as the United States (U.S. or US), or America, is a country Contiguous United States, primarily located in North America. It consists of 50 U ...
created the Alternative Minimum Tax. By 1986, limited electronic filing of tax returns was possible. The
Internal Revenue Service Restructuring and Reform Act of 1998 The Internal Revenue Service Restructuring and Reform Act of 1998, also known as Taxpayer Bill of Rights III, (), resulted from hearings held by the United States Congress in 1996 and 1997. The Act included numerous amendments to the Internal Revenu ...
("RRA 98") changed the organization from geographically oriented to an organization based on four operating divisions. It added "10 deadly sins" that require immediate termination of IRS employees found to have committed certain misconduct. Enforcement activities declined. The IRS Oversight Board noted that the decline in enforcement activities has "rais
d
d
questions about tax compliance and fairness to the vast majority of citizens who pay all their taxes". In June 2012, the IRS Oversight Board recommended to Treasury a fiscal year 2014 budget of $13.074billion for the Internal Revenue Service. On December 20, 2017, Congress passed the
Tax Cuts and Jobs Act of 2017 The Tax Cut and Jobs Act of 2017 (TCJA) is a congressional revenue act of the United States signed into law by President Donald Trump which amended the Internal Revenue Code of 1986. Major elements of the changes include reducing tax rates for busi ...
. It was signed into law by President Trump on December 22, 2017. In the 2017 fiscal year, the IRS had 76,832 employees conducting its work, a decrease of 14.9 percent from 2012.


Presidential tax returns (1973)

From the 1950s through the 1970s, the IRS began using technology such as microfilm to keep and organize records. Access to this information proved controversial, when
President Richard Nixon Richard Milhous Nixon (January 9, 1913April 22, 1994) was the 37th president of the United States The president of the United States (POTUS) is the head of state and head of government of the United States of America. The president di ...

President Richard Nixon
's tax returns were leaked to the public. His tax advisor, Edward L. Morgan, became the fourth law-enforcement official to be charged with a crime during
Watergate The Watergate scandal was a major political scandal in the United States involving the administration Administration may refer to: Management of organizations * Management Management (or managing) is the administration of an organiz ...
. John Requard, Jr., accused of leaking the Nixon tax returns, collected delinquent taxes in the slums of Washington. In his words: "We went after people for nickels and dimes, many of them poor and in many cases illiterate people who didn't know how to deal with a government agency." Requard admitted that he saw the returns, but denied that he leaked them. Reporter
Jack White John Anthony White (; born July 9, 1975) is an American singer, songwriter, multi-instrumentalist and producer. He is best known as the lead singer and guitarist of the duo the White Stripes, but has also had success in other bands and as a solo ...
of ''
The Providence Journal 225px, Logo of projo.com ''The Providence Journal'', colloquially known as the ''ProJo'', is a daily newspaper A newspaper is a Periodical literature, periodical publication containing written News, information about current events and is of ...
'' won the
Pulitzer Prize#REDIRECT Pulitzer Prize The Pulitzer Prize () is an award for achievements in newspaper, magazine and online journalism, literature and musical composition within the United States. It was established in 1917 by provisions in the will of Joseph ...
for reporting about Nixon's tax returns. Nixon, with a salary of $200,000, paid $792.81 in federal income tax in 1970 and $878.03 in 1971, with deductions of $571,000 for donating "vice-presidential papers". This was one of the reasons for his famous statement: "Well, I'm not a crook. I've earned everything I've got." So controversial was this leak, that most later US Presidents released their tax returns (though sometimes only partially). These returns can be found online at the Tax History Project.


Computerization (1959–present)

By the end of the Second World War, the IRS was handling sixty million tax returns each year, using a combination of mechanical desk calculators, accounting machines, and pencil and paper forms. In 1948
punch card A punched card (also punch cardSteven Pinker, in ''The Stuff of Thought'', Viking, 2007, p.362, notes the loss of ''-ed'' in pronunciation ''as it did in ice cream, mincemeat, and box set, formerly iced cream, minced meat, and boxed set.'' or pu ...

punch card
equipment was used. The first trial of a computer system for income tax processing was in 1955, when an
IBM 650 IBM 650 console panel, showing bi-quinary indicators. (At House for the History of IBM Data Processing (closed), Sindelfingen) The IBM 650 Magnetic Drum Data-Processing Machine is an early digital computer A computer is a machine A m ...
installed at
Kansas City The Kansas City metropolitan area is a bi-state metropolitan area A metropolitan area or metro is a region consisting of a densely populated urban core Urban means "related to a city". In that sense, the term may refer to: * Urban area ...
processed 1.1 million returns. The IRS was authorized to proceed with computerization in 1959, and purchased
IBM 1401 The IBM 1401 is a variable-wordlength decimal computer Decimal computers are computers which can represent numbers and addresses in decimal The decimal numeral system A numeral system (or system of numeration) is a writing system ...
and
IBM 7070 IBM 7070 was a intermediate data-processing system that was introduced by in 1958. It was part of the , and was based on discrete s rather than the s of the 1950s. It was the company's first transistorized . The 7070 was expected to be a "common ...

IBM 7070
systems for local and regional data processing centers. The
Social Security number In the United States, a Social Security number (SSN) is a nine-digit number issued to United States nationality law, U.S. citizens, Permanent residence (United States), permanent residents, and temporary (working) residents under section 205(c)(2) ...
was used for taxpayer identification starting in 1965. By 1967, all returns were processed by computer and punched card data entry was phased out.Paul Cenuzi, ''A History of Modern Computing'', MIT Press, 2003. . pp. 119–122. Information processing in the IRS systems of the late 1960s was in batch mode; microfilm records were updated weekly and distributed to regional centers for handling tax inquiries. A project to implement an interactive, realtime system, the "Tax Administration System", was launched, that would provide thousands of local interactive terminals at IRS offices. However, the
General Accounting Office The U.S. Government Accountability Office (GAO) is a legislative branch A legislature is a deliberative assembly A deliberative assembly is a gathering of members (of any kind of collective) who use parliamentary procedure Parliamentary p ...
prepared a report critical of the lack of protection of privacy in TAS, and the project was abandoned in 1978. In 1995, the IRS began to use the public Internet for electronic filing. Since the introduction of e-filing, self-paced online tax services have flourished, augmenting the work of tax accountants, who were sometimes replaced. In 2003, the IRS struck a deal with tax software vendors: The IRS would not develop online filing software and, in return, software vendors would provide free e-filing to most Americans. In 2009, 70% of filers qualified for free electronic filing of federal returns. According to an inspector general's report, released in November 2013, identity theft in the United States is blamed for $4billion worth of fraudulent 2012 tax refunds by the IRS. Fraudulent claims were made with the use of stolen taxpayer identification and Social Security numbers, with returns sent to addresses both in the US and internationally. Following the release of the findings, the IRS stated that it resolved most of the identity theft cases of 2013 within 120 days, while the average time to resolve cases from the 2011/2012 tax period was 312 days. In September 2014, IRS Commissioner
John Koskinen John Andrew Koskinen (born June 30, 1939) is an American businessman and public official of Finnish descent. He served as the non-executive chairman of Freddie Mac The Federal Home Loan Mortgage Corporation (FHLMC), known as Freddie Mac, is a pub ...
expressed concern over the organization's ability to handle
Obamacare The Affordable Care Act (ACA), formally known as the Patient Protection and Affordable Care Act, and colloquially known as Obamacare, is a United States federal statute enacted by the 111th United States Congress and signed into law by Pres ...
and administer
premium tax creditThe premium tax credit (PTC) is a refundable tax credit A tax credit is a tax incentive which allows certain taxpayers to subtract the amount of the credit they have accrued from the total they owe the state. It may also be a credit granted in rec ...
s that help people pay for health plans from the health law's insurance exchanges. It will also enforce the law's
individual mandate An individual mandate is a requirement by law for certain persons A person (plural people or persons) is a being that has certain capacities or attributes such as reason Reason is the capacity of consciously making sense of things, applying ...
, which requires most Americans to hold health insurance. In January 2015,
Fox News The Fox News Channel, abbreviated FNC, commonly known as Fox News, and stylized in all caps In typography, all caps (short for "all capitalization, capitals") refers to text or a typeface, font in which all letters are capital letters, for ...
obtained an email which predicted a messy tax season on several fronts. The email was sent by IRS Commissioner Koskinen to workers. Koskinen predicted the IRS would shut down operations for two days later this year which would result in unpaid
furlough A furlough (; from nl, verlof, " leave of absence") is a temporary leave of employees due to special needs of a company or employer, which may be due to economic conditions of a specific employer or in society as a whole. These furloughs may be sh ...
s for employees and service cuts for
taxpayer A taxpayer is a person or organization (such as a company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal personality, legal or a mixture of both ...

taxpayer
s. Koskinen also said delays to investments of more than $200million may delay new taxpayer protections against
identity theft Identity theft occurs when someone uses another person's personal identifying information, like their name, identifying number, or credit card number, without their permission, to commit fraud or other crimes. The term ''identity theft'' was coi ...
. Also in January 2015, the editorial board of ''
The New York Times ''The New York Times'' is an American daily newspaper based in New York City with a worldwide readership. Founded in 1851, the ''Times'' has since won List of Pulitzer Prizes awarded to The New York Times, 132 Pulitzer Prizes, the most of a ...

The New York Times
'' called the IRS budget cuts penny-wise-and-pound-foolish, where for every dollar of cuts in the budget, six were lost in tax revenue.


History of the IRS name

As early as the year 1918, the Bureau of Internal Revenue began using the name "Internal Revenue Service" on at least one tax form. In 1953, the name change to the "Internal Revenue Service" was formalized in Treasury Decision 6038.


Current organization

The 1980s saw a reorganization of the IRS. A bipartisan commission was created with several mandates, among them to increase customer service and improve collections. Congress later enacted the
Internal Revenue Service Restructuring and Reform Act of 1998 The Internal Revenue Service Restructuring and Reform Act of 1998, also known as Taxpayer Bill of Rights III, (), resulted from hearings held by the United States Congress in 1996 and 1997. The Act included numerous amendments to the Internal Revenu ...
. Because of that Act, the IRS now functions under four major operating divisions: Large Business and International (LB&I), Small Business/Self-Employed (SB/SE), Wage and Investment (W&I), and Tax Exempt & Government Entities (TE/GE). Effective October 1, 2010, the name of the Large and Mid-Size Business division was changed to the Large Business & International (LB&I) division. While there is some evidence that customer service has improved, lost tax revenues in 2001 were over $323billion. The IRS is headquartered in
Washington, D.C. ) , image_skyline = , image_caption = Clockwise from top left: the Washington Monument The Washington Monument is an obelisk within the National Mall The National Mall is a Landscape architecture, landscaped ...
, and does most of its
computer programming Computer programming is the process of designing and building an executable computer program to accomplish a specific computing result or to perform a particular task. Programming involves tasks such as analysis, generating algorithms, Profilin ...
in Maryland. It currently operates five submission processing centers which process
returns Return may refer to: In business, economics, and finance * Rate of return, the financial term for the profit or loss derived from an investment * Tax return, a blank document or template supplied by a government for use in the reporting of tax inf ...
sent by
mail The mail or post is a system for physically transporting postcard A postcard or post card is a piece of thick paper or thin Card stock, cardboard, typically rectangular, intended for writing and mailing without an envelope. Non-rectangular s ...
and returns filed electronically via E-file. Different types of returns are processed at the various centers with some centers processing individual returns and others processing business returns. Originally, there were ten submission processing centers across the country. In the early 2000s, the IRS closed five centers: Andover, MA; Holtsville, NY; Philadelphia, PA; Atlanta, GA; and Memphis, TN. This currently leaves five centers processing returns: Austin, TX; Covington, KY; Fresno, CA; Kansas City, MO; and Ogden, UT. In October 2016 the IRS announced that three more centers will close over a six-year period: Covington, KY in 2019; Fresno, CA in 2021; and Austin, TX in 2024. This will leave Kansas City, MO and Ogden, UT as the final two submission processing centers after 2024. The IRS also operates three computer centers around the country (in Detroit, Michigan; Martinsburg, West Virginia; and Memphis, Tennessee).


Commissioner

The current IRS commissioner is Charles P. Rettig of California. There have been 48 previous commissioners of Internal Revenue and 28 acting commissioners since the agency's creation in 1862. From May 22, 2013 to December 23, 2013, senior official at the
Office of Management and Budget The Office of Management and Budget (OMB) is the largest office within the Executive Office of the President of the United States (EOP). OMB's most prominent function is to produce the president's budget, but it also examines agency programs, poli ...
was acting Commissioner of Internal Revenue.President Obama Appoints Daniel Werfel as Acting Commissioner of Internal Revenue
May 16, 2013
Werfel, who attended law school at the
University of North Carolina The University of North Carolina is the multi-campus public university system for the state of North Carolina North Carolina () is a U.S. state, state in the Southeastern United States, Southeastern region of the United States. North Caroli ...
and attained a master's degree from
Duke University Duke University is a Private university, private research university in Durham, North Carolina. Founded by Methodists and Quakers in the present-day town of Trinity, North Carolina, Trinity in 1838, the school moved to Durham in 1892. In 1924, t ...
, prepared the government for a potential shutdown in 2011 by determining which services that would remain in existence. No IRS commissioner has served more than five years and one month since Guy Helvering, who served 10 years until 1943. The most recent commissioner to serve the longest term was Doug Shulman, who was appointed by President
George W. Bush George Walker Bush (born July 6, 1946) is an American politician and businessman who served as the 43rd president of the United States The president of the United States (POTUS) is the head of state and head of government of the Un ...

George W. Bush
and served for five years.


Deputy Commissioners

The Commissioner of Internal Revenue is assisted by two deputy commissioners. The Deputy Commissioner for Operations Support reports directly to the Commissioner and oversees the IRS's integrated support functions, facilitating economy of scale efficiencies and better business practices. The Deputy Commissioner for Operations Support provides executive leadership for customer service, processing, tax law enforcement and financial management operations and is responsible for overseeing IRS operations and providing executive leadership on policies, programs and activities. The Deputy assists and acts on behalf of the IRS Commissioner in directing, coordinating and controlling the policies, programs and activities of the IRS; in establishing tax administration policy, and developing strategic issues and objectives for IRS strategic management. The Deputy Commissioner for Services and Enforcement reports directly to the Commissioner and oversees the four primary operating divisions responsible for the major customer segments and other taxpayer-facing functions. The Deputy Commissioner for Services and Enforcement serves as the IRS Commissioner's essential assistant acting on behalf of the commissioner in establishing and enforcing tax administration policy and upholding IRS's mission to provide America's taxpayers top-quality service by helping them understand and meet their tax responsibilities.


Office of the Taxpayer Advocate

The
Office of the Taxpayer Advocate The Office of the Taxpayer Advocate, also called the Taxpayer Advocate Service (TAS), is an office within the Internal Revenue Service (IRS) of the U.S. Department of the Treasury, reporting directly to the Commissioner of Internal Revenue. The off ...
, also called the Taxpayer Advocate Service, is an independent office within the IRS responsible for assisting taxpayers in resolving their problems with the IRS and identifying systemic problems that exist within the IRS. The current head of the organization, known as the ''United States Taxpayer Advocate'', is Erin M. Collins.


Independent Office of Appeals

The Independent Office of Appeals is an independent organization within the IRS that helps taxpayers resolve their tax disputes through an informal, administrative process. Its mission is to resolve tax controversies fairly and impartially, without litigation. Resolution of a case in Appeals "could take anywhere from 90 days to a year". The current chief is Donna C. Hansberry.


Office of Professional Responsibility (OPR)

OPR investigates suspected misconduct by attorneys, CPAs and enrolled agents ("tax practitioners") involving practice before the IRS and has the power to impose various penalties. OPR can also take action against tax practitioners for conviction of a crime or failure to file their own tax returns. According to former OPR director Karen Hawkins, "The focus has been on
roadkill s like this bear are particularly vulnerable to becoming roadkill Roadkill is an Fauna, animal or animals that have been struck and killed by motor vehicle Electric bicycles parked in Yangzhou's main street, Wenchang Lu. They are a very commo ...

roadkill
the easy cases of tax practitioners who are non-filers." The current acting director is Elizabeth Kastenberg.


Criminal Investigation (CI)

Internal Revenue Service, Criminal Investigation (IRS-CI) is responsible for investigating potential criminal violations of the U.S.
Internal Revenue Code The Internal Revenue Code (IRC), formally the Internal Revenue Code of 1986, is the domestic portion of federal statutory tax law in the United States, published in various volumes of the United States Statutes at Large The ''United States Sta ...

Internal Revenue Code
and related financial crimes, such as money laundering, currency violations, tax-related identity theft fraud, and terrorist financing that adversely affect tax administration. This division is headed by the '' Chief, Criminal Investigation'' appointed by the IRS Commissioner.


Programs

Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) are volunteer programs that the IRS runs to train volunteers and provide tax assistance and counseling to taxpayers. Volunteers can study e-course material, take tests, and practice using tax-preparation software. Link & Learn Taxes (searchable by keyword on the IRS website), is the free e-learning portion of VITA/TCE program for training volunteers.


Structure

*
Commissioner of Internal Revenue The Commissioner of Internal Revenue is the head of the Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service of the United States federal government responsible for collecting taxes and administering the Inte ...
***Deputy Commissioner for Services and Enforcement ****Assistant Deputy Commissioner for Services and Enforcement ****Large Business and International Divisionadministers tax laws governing businesses with assets greater than $10million ***** ****Small Business/Self-Employed Divisionadministers tax laws governing small businesses and self-employed taxpayers *****Collection – collects delinquent taxes and secures filing of delinquent tax return *****Examination – reviews returns to ensure taxpayers have complied with their tax responsibilities *****Operations Support – centralized support services ****Wage and Investment Divisionadministers tax laws governing individual wage earners *****Customer Assistance, Relationships and Educationassist taxpayers in satisfying their tax responsibilities *****Return Integrity and Compliance Servicesdetecting and preventing improper refunds *****Customer Account Servicesprocessing taxpayer returns *****Operations Support – internal management and support services ****Tax Exempt and Government Entities Divisionadministers tax laws governing governmental and tax exempt entities *****Government Entities/Shares Servicesmanages, directs, and executes nationwide activities for government entities as well as provides divisional operational support *****Employee Plans. – administers pension plan tax laws *****Exempt Organizations – determining tax exempt status for organizations and regulating the same through examination and compliance checks ****Criminal Investigation Divisioninvestigates criminal violations of tax laws and other related financial crimes *****International Operations – conducts international investigations of financial crimes and provides special agent attaches in strategic international locations *****Operations, Policy, and Supportplans, develops, directs, and implements criminal investigations through regional field offices *****Refund and Cyber Crimesidentifying criminal tax schemes and conducting cybercrime investigations *****Strategy – internal support services *****Technology Operations and Investigative Servicesmanagement of information technology ****Office of Online Services ****Return Preparer Office ****Office of Professional Responsibility ****Whistleblower Office ***Deputy Commissioner for Operations Support ****Assistant Deputy Commissioner for Operations Support ****Chief, Facilities Management and Security Services ****Chief Information Officer ****Chief Privacy Officer ****Chief Procurement Officer ****Chief Financial Officer ****IRS Human Capital Officer ****Chief Risk Officer ****Chief Diversity Officer ****Chief Research and Analytics Officer ***Chief of Staff ***Chief, Communications and Liaison ***National Taxpayer Advocate ***Chief Counsel ***Chief, IRS Independent Office of Appeals


Tax collection statistics

Summary of collections before refunds by type of return, fiscal year 2010: For fiscal year 2009, the U.S. Congress appropriated spending of approximately $12.624billion of "discretionary budget authority" to operate the Department of the Treasury, of which $11.522billion was allocated to the IRS. The projected estimate of the budget for the IRS for fiscal year 2011 was $12.633billion. By contrast, during Fiscal Year (FY) 2006, the IRS collected more than $2.2trillion in tax (net of refunds), about 44 percent of which was attributable to the individual income tax. This is partially due to the nature of the individual income tax category, containing taxes collected from working class, small business, self-employed, and capital gains. The top 5% of income earners pay 38.284% of the federal tax collected. As of 2007, the agency estimates that the United States Treasury is owed $354billion more than the amount the IRS collects. This is known as the tax gap. The gross tax gap is the amount of true tax liability that is not paid voluntarily and timely. For years 2008-2010, the estimated gross tax gap was $458billion. The net tax gap is the gross tax gap less tax that will be subsequently collected, either paid voluntarily or as the result of IRS administrative and enforcement activities; it is the portion of the gross tax gap that will not be paid. It is estimated that $52billion of the gross tax gap was eventually collected resulting in a net tax gap of $406billion. In 2011, 234 million tax returns were filed allowing the IRS to collect $2.4trillion out of which $384billion were attributed to mistake or
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.


Outsourcing collection and tax-assistance

In September 2006, the IRS started to outsource the collection of taxpayers debts to private debt collection agencies. Opponents to this change note that the IRS will be handing over personal information to these debt collection agencies, who are being paid between 29% and 39% of the amount collected. Opponents are also worried about the agencies' being paid on percent collected, because it will encourage the collectors to use pressure tactics to collect the maximum amount. IRS spokesman Terry Lemons responds to these critics saying the new system "is a sound, balanced program that respects taxpayers' rights and taxpayer privacy". Other state and local agencies also use private collection agencies. In March 2009, the IRS announced that it would no longer outsource the collection of taxpayers debts to private debt collection agencies. The IRS decided not to renew contracts to private debt collection agencies, and began a hiring program at its call sites and processing centers across the country to bring on more personnel to process collections internally from taxpayers. As of October 2009, the IRS has ceased using private debt collection agencies. In September 2009, after undercover exposé videos of questionable activities by staff of one of the IRS's volunteer tax-assistance organizations were made public, the IRS removed
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from its volunteer tax-assistance program.


Administrative functions

The IRS publishes tax forms which taxpayers are required to choose from and use for calculating and reporting their federal tax obligations. The IRS also publishes a number of forms for its own internal operations, such as Forms 3471 and 4228 (which are used during the initial processing of income tax returns). In addition to collection of revenue and pursuing tax cheaters, the IRS issues administrative rulings such as
revenue ruling#REDIRECT Revenue ruling Revenue rulings are public administrative rulings by the Internal Revenue Service (IRS) in the United States Department of the Treasury of the United States federal government that apply the law to particular factual situatio ...
s and private letter rulings. In addition, the Service publishes the
Internal Revenue Bulletin The ''Internal Revenue Bulletin'' (also known as the ''IRB''), is a weekly publication of the U.S. Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service of the United States federal government responsible for c ...
containing the various IRS pronouncements. The controlling authority of regulations and revenue rulings allows taxpayers to rely on them. A letter ruling is good for the taxpayer to whom it is issued, and gives some explanation of the Service's position on a particular tax issue.Internal Revenue Manual Section 3.28.3
Additionally, a letter ruling reasonably relied upon by a taxpayer allows for the waiver of penalties for underpayment of tax. As is the case with all administrative pronouncements, taxpayers sometimes litigate the validity of the pronouncements, and courts sometimes determine a particular rule to be invalid where the agency has exceeded its grant of authority. The IRS also issues formal pronouncements called Revenue Procedures, that among other things tell taxpayers how to correct prior tax errors. The IRS's own internal operations manual is the Internal Revenue Manual, which describes the clerical procedures for processing and auditing tax returns in excruciating detail. For example, the Internal Revenue Manual contains a special procedure for processing the tax returns of the President and
Vice President of the United States The vice president of the United States (VPOTUS) is the second-highest officer in the executive branch The executive (short for executive branch or executive power) is the part of government A government is the system or group ...
. More formal rulemaking to give the Service's interpretation of a statute, or when the statute itself directs that the
Secretary of the Treasury The United States secretary of the treasury is the head of the United States Department of the Treasury, which is concerned with all financial and monetary matters relating to the federal government, and, until 2003, also included several major ...
shall provide, IRS undergoes the formal regulation process with a
Notice of proposed rulemaking Notice is the legal concept describing a requirement that a party be aware of legal process affecting their rights, obligations or duties. There are several types of notice: public notice (or legal notice), actual notice, constructive notice, ...
(NPRM) published in the
Federal Register The ''Federal Register'' (FR or sometimes Fed. Reg.) is the official journal A government gazette (also known as official gazette, official journal, official newspaper, official monitor or official bulletin) is a periodical publication that h ...
announcing the proposed regulation, the date of the in-person hearing, and the process for interested parties to have their views heard either in person at the hearing in Washington, D.C., or by mail. Following the statutory period provided in the Administrative Procedure Act the Service decides on the final regulations "as is", or as reflecting changes, or sometimes withdraws the proposed regulations. Generally, taxpayers may rely on proposed regulations until final regulations become effective. For example, human resource professionals are relying on the October 4, 2005 Proposed Regulations (citation 70 F.R. 57930-57984) for the Section 409A on deferred compensation (the so-called
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rules on deferred compensation to add teeth to the old rules) because regulations have not been finalized. The IRS oversaw the Homebuyer Credit and First Time Homebuyer Credit programs instituted by the federal government from 2008-2010. Those programs provided United States citizens with money toward the purchase of homes, regardless of income tax filings.


Labor union

Most non-supervisory employees at the IRS are represented by a labor union. The exclusive labor union at the IRS is the
National Treasury Employees Union The National Treasury Employees Union (NTEU) is an independent labor union A trade union (or a labor union in American English), often simply called a union, is an organization of workers who have come together to achieve many common goals, su ...
(NTEU). Employees aren't required to join the union or pay dues. The IRS and NTEU have a national
collective bargaining agreement A collective agreement, collective labour agreement (CLA) or collective bargaining agreement (CBA) is a written contract negotiated through collective bargaining Collective bargaining is a process of negotiation between employers and a group of em ...
. In pursuing administrative remedies against the IRS for certain unfair or illegal personnel actions, under federal law an IRS employee may choose only one of the three forums below: *NTEU, or *
United States Merit Systems Protection Board The Merit Systems Protection Board (MSPB) is an independent quasi-judicial agency established in 1979 to protect federal merit systems against partisan political and other prohibited personnel practices and to ensure adequate protection for United ...
(MSPB), or *
United States Office of Special Counsel The United States Office of Special Counsel (OSC) is a permanent independent federal investigative and prosecutorial agency whose basic legislative authority comes from four federal statutes: the Civil Service Reform Act, the Whistleblower Prot ...
(OSC). Employees are also required to report certain misconduct to
TIGTA The Treasury Inspector General for Tax Administration (TIGTA) is an office in the United States Federal government. It was established in January 1999 in accordance with the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 98) to ...
. Federal law prohibits reprisal or retaliation against an employee who reports wrongdoing.


Controversies

The IRS has been accused of abusive behavior on multiple occasions. Testimony was given before a Senate subcommittee that focused on cases of overly aggressive IRS collection tactics in considering a need for legislation to give taxpayers greater protection in disputes with the agency. Congress passed the Taxpayer Bill of Rights III on July 22, 1998, which shifted the burden of proof from the taxpayer to the IRS in certain limited situations. The IRS retains the legal authority to enforce liens and seize assets without obtaining judgment in court. In 2002, the IRS accused James and Pamela Moran, as well as several others, of conspiracy, filing false tax returns and mail fraud as part of the Anderson Ark investment scheme. The Morans were eventually acquitted, and their attorney stated that the government should have realized that the couple was merely duped by those running the scheme. In 2004, the law licenses of two former IRS lawyers were suspended after a federal court ruled that they defrauded the courts so the IRS could win a sum in tax shelter cases. In 2013, the Internal Revenue Service became embroiled in a
political scandal In politics, a political scandal is an action or event regarded as morally or legally wrong and causing general public outrage. Politicians, government officials, Political party, party officials and Lobbying, lobbyists can be accused of various i ...
in which it was discovered that the agency subjected
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or conservative-sounding groups filing for tax-exempt status to extra scrutiny. On September 5, 2014, 16 months after the scandal first erupted, a Senate Subcommittee released a report that confirmed that Internal Revenue Service used inappropriate criteria to target Tea Party groups, but found no evidence of political bias. The chairman of the Senate Permanent Subcommittee on Investigations confirmed that while the actions were "inappropriate, intrusive, and burdensome", the Democrats have often experienced similar treatment. Republicans noted that 83% of the groups being held up by the IRS were right-leaning; and the Subcommittee Minority staff, which did not join the Majority staff report, filed a dissenting report entitled, "IRS Targeting Tea Party Groups". On May 25, 2015, the agency announced that over several months criminals had accessed the private tax information of more than 100,000 taxpayers and stolen about $50million in fraudulent returns. By providing Social Security numbers and other information obtained from prior computer crimes, the criminals were able to use the IRS's online "Get Transcript" function to have the IRS provide them with the tax returns and other private information of American tax filers. On August 17, 2015, IRS disclosed that the breach had compromised an additional 220,000 taxpayer records. On February 27, 2016, the IRS disclosed that more than 700,000 Social Security numbers and other sensitive information had been stolen. The Internal Revenue Service has been the subject of frequent criticism by many elected officials and candidates for political office, including some who have called to abolish the IRS. Among them were
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,
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Rand Paul
,
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Ben Carson
,
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Mike Huckabee
, and
Richard Lugar Richard Green Lugar (April 4, 1932 – April 28, 2019) was an American politician who served as a United States Senator The United States Senate is the Upper house, upper chamber of the United States Congress, with the United States ...
. In 1998, a Republican congressman introduced a bill to repeal the Internal Revenue Code by 2002. In 2016, The
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, which counts over two-thirds of House of Representatives Republicans as its members, called for "the complete elimination of the IRS", and Republican Representative
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Rob Woodall
of Georgia has introduced a bill every year since he entered Congress in 2011 to eliminate income taxes and abolish the IRS. The IRS has been criticized for its reliance on legacy software. Systems such as the Individual Master File are more than 50 years old and have been identified by the
Government Accountability Office The U.S. Government Accountability Office (GAO) is a legislative branch A legislature is a deliberative assembly A deliberative assembly is a gathering of members (of any kind of collective) who use parliamentary procedure Parliamentary ...
as "facing significant risks due to their reliance on legacy programming languages, outdated hardware, and a shortage of human resources with critical skills".


See also

*
HM Revenue and Customs , type = Non-ministerial government department Non-ministerial government departments (NMGDs) are a type of Departments of the Government of the United Kingdom, department of the Government of the United Kingdom that deal with matters for whic ...
, the UK equivalent * Income Tax Department, India * IRS penalties *
Tax evasion in the United States Under the federal law of the United States of America, tax evasion or tax fraud, is the purposeful illegal attempt of a taxpayer to evade assessment or payment of a tax A tax is a compulsory financial charge or some other type of levy imposed on ...


References

* *


Further reading

* * * *


External links


Internal Revenue Service Official websiteInternal Revenue Service
in the ''
Federal Register The ''Federal Register'' (FR or sometimes Fed. Reg.) is the official journal A government gazette (also known as official gazette, official journal, official newspaper, official monitor or official bulletin) is a periodical publication that h ...
''
IRS Code 766IRS Code 570Code 806
{{Authority control 1862 establishments in the United States Financial regulatory authorities of the United States Government agencies established in 1953 Revenue services Tax investigation Tax terms Taxation in the United States