What Is the IRS?
The IRS is a government agency that is responsible for the nation’s tax collection. This includes the taxes of individuals, corporations, and businesses. They administer the Internal Revenue Code as enacted by Congress.
The origins of the IRS date back to revolutionary times when the nation was at war because of taxation without representation. In 1789, Congress implemented the Department of the Treasury and later imposed taxes on goods like sugar and carriages to fund the War of 1812.
In 1913, the 16th Amendment was added to the Constitution, allowing the government to tax corporate and individual income. Throughout the years, taxes were added and adjusted to meet the many needs of the nation.
In 1952, President Truman called for a restructuring of the Bureau of Internal Revenue. It became the Internal Revenue Service on July 9, 1953. Throughout the years, the IRS has continued to advance the way it collects taxes as well as the ways it puts taxpayer money to use.
Learn more about the IRS and its role in American government.
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What Does IRS Stand For?
IRS stands for Internal Revenue Service. The IRS has a number of responsibilities, including collecting taxes and administering the Internal Revenue Code. The IRS is also responsible for providing assistance to taxpayers who need it, as well as resolving issues regarding fraudulent taxes and auditing taxpayers. Additionally, the IRS oversees a number of benefit programs offered by the government, including the Affordable Care Act.
Some citizens are wary of the tax office because they don’t favor some of the government programs taxes help to fund. A Rasmussen Report found that 42% of Americans have an unfavorable outlook on the IRS. Another survey conducted by WalletHub found that 89% of people think the government currently does not spend their tax dollars wisely, causing citizens to distrust the IRS.
Though it is not well-liked, the IRS is necessary for our government and way of life. The IRS collects revenue for essential services throughout the country. The tax dollars the IRS collects are used to fund government programs like Social Security, Medicare, and Medicaid.
Taxes are also used to pay for the nation’s defense, as well as foreign and veteran affairs. Further, tax dollars are used to develop communities, pay for law enforcement, and other government services. The IRS is transparent about the taxes they collect, listing statistical data online for taxpayers to examine.
What Does the IRS Do?
In addition to collecting taxes and administering tax laws, the IRS provides a number of other services, including:
- Processing tax returns and issuing refunds. The IRS processes taxes on behalf of individuals, businesses, government entities, and international taxpayers. Once completed, they will administer a refund if applicable to the taxpayer.
- Enforcing tax laws. If the IRS finds that someone made an error or fraudulent report on their taxes, they are responsible for enforcing the tax law, which can mean fines or jail time, depending on the severity of the fraud.
- Assisting taxpayers. The IRS provides assistance to those who need help filing their taxes. You can contact the IRS if you need assistance with your taxes.
- Auditing taxpayers. The IRS may review your taxes to ensure the financial information reported is accurate and done so in accordance with the law.
- Funding government organizations like Medicare, Medicaid, and Social Security.
What Does It Mean To Be Audited?
Auditing is a huge part of IRS services. This is when your taxes are reviewed to ensure everything is accurately and honestly reported. There are a number of reasons someone would be audited, including:
- Failing to declare the correct amount of income.
- Claiming higher deductions.
- Unusual charitable donations.
- Random selection — the IRS compares your tax return to statistical data as part of national research.
- If your return involves issues with other taxpayers, related examinations may be required and you may be selected for an audit.
- Less extreme reasons, such as mathematical mistakes.
- Deductions related to a home office.
- Losses related to rental properties or hobbies.
- Foreign currency transactions or related bank accounts.
If you receive a tax audit, there is no need to panic. The IRS may conduct an audit in person or through the mail. The most extensive audit is a field audit, which is when an IRS agent comes to your home or business to go through your records and confirm that the information you presented is correct.
How Do I Know if I Owe the IRS?
The IRS can get ahold of you in many ways. When filing, you should get a notification right away if you owe on your taxes. The IRS can also notify you through email or snail mail.
Recently the IRS has created a way to check your account balance online, making it easy to check how much you owe. This tool also allows you to check information like:
- Your balance for each tax year and up to 24 months of your payment history.
- Important information from the current tax year.
- Electronic payment options.
- Access to tax transcripts.
Whether you’re a fan of this government agency or not, the IRS is an important part of our nation. They collect the funds we need to keep government-funded projects the country needs in motion.
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This post was updated December 12, 2019. It was originally published December 12, 2019.