<<–2/”>a href=”https://exam.pscnotes.com/5653-2/”>h2>IRS: The Internal Revenue Service
What is the IRS?
The Internal Revenue Service (IRS) is the revenue service of the United States federal government. It is responsible for collecting taxes, administering Tax Laws, and enforcing tax regulations. The IRS is a bureau of the Department of the Treasury.
History of the IRS
The IRS has a long and complex history, dating back to the American Revolution. The first federal Income tax was enacted in 1861 to help finance the Civil War. However, this tax was repealed in 1872.
In 1894, Congress passed another income tax law, but it was declared unconstitutional by The Supreme Court in 1895. The Sixteenth Amendment to the Constitution, ratified in 1913, gave Congress the power to levy an income tax without apportionment among the states.
The IRS was formally established in 1862 as the Office of Internal Revenue. It was reorganized and renamed the Bureau of Internal Revenue in 1863. In 1953, the Bureau of Internal Revenue was renamed the Internal Revenue Service.
IRS Responsibilities
The IRS is responsible for a wide range of activities, including:
- Collecting taxes: The IRS collects taxes from individuals, businesses, and other entities. This includes income tax, payroll tax, Corporate tax, estate tax, and gift tax.
- Administering tax laws: The IRS is responsible for interpreting and applying tax laws. It issues regulations, rulings, and other guidance to taxpayers.
- Enforcing tax regulations: The IRS enforces tax laws by Auditing taxpayers, investigating tax fraud, and pursuing delinquent taxpayers.
- Providing taxpayer assistance: The IRS provides a variety of Services to taxpayers, including information about tax laws, assistance with filing tax returns, and help with resolving tax problems.
IRS Organization
The IRS is organized into several major divisions, including:
- Large Business and International (LB&I): This division is responsible for auditing large corporations and multinational businesses.
- Small Business/Self-Employed (SB/SE): This division is responsible for auditing small businesses and self-employed individuals.
- Tax Exempt and Government Entities (TE/GE): This division is responsible for auditing tax-exempt organizations and government entities.
- Wage and Investment (W&I): This division is responsible for processing tax returns and collecting taxes from individuals and businesses.
- Criminal Investigation (CI): This division is responsible for investigating tax fraud and other criminal activity related to taxes.
IRS Budget and Funding
The IRS is funded by the federal government. The agency’s budget is determined by Congress and is subject to annual appropriations. The IRS’s budget has been declining in recent years, which has led to staffing cuts and reduced services.
IRS Taxpayer Services
The IRS provides a variety of services to taxpayers, including:
- Taxpayer Assistance Centers (TACs): TACs are located throughout the country and provide in-person assistance to taxpayers.
- IRS.gov: The IRS website provides a wealth of information about tax laws, regulations, and services.
- IRS publications: The IRS publishes a variety of publications that provide information about specific tax topics.
- Telephone assistance: The IRS offers telephone assistance to taxpayers who have questions about their taxes.
IRS Audits
An IRS audit is an examination of a taxpayer’s financial records to verify the accuracy of their tax return. Audits can be conducted by mail, telephone, or in person.
There are several types of IRS audits, including:
- Correspondence audit: This is the most common type of audit. It is conducted by mail and typically involves a few specific items on the taxpayer’s return.
- Office audit: This type of audit is conducted at an IRS office. It is typically more complex than a correspondence audit and may involve a broader range of issues.
- Field audit: This is the most intrusive type of audit. It is conducted at the taxpayer’s place of business or residence and may involve a thorough examination of the taxpayer’s financial records.
IRS Penalties
The IRS can impose penalties on taxpayers who fail to comply with tax laws. These penalties can include:
- Late filing penalty: This penalty is imposed on taxpayers who file their tax return after the deadline.
- Late payment penalty: This penalty is imposed on taxpayers who fail to pay their taxes by the deadline.
- Accuracy-related penalty: This penalty is imposed on taxpayers who make errors on their tax return.
- Fraud penalty: This penalty is imposed on taxpayers who intentionally file a false tax return.
IRS Taxpayer Bill of Rights
The IRS Taxpayer Bill of Rights outlines the rights of taxpayers when dealing with the IRS. These rights include:
- The right to be informed: Taxpayers have the right to receive clear and accurate information about their tax obligations.
- The right to pay only what you owe: Taxpayers have the right to pay only the correct amount of taxes.
- The right to quality service: Taxpayers have the right to receive courteous and professional service from the IRS.
- The right to confidentiality: Taxpayers have the right to have their personal information kept confidential.
- The right to appeal: Taxpayers have the right to appeal IRS decisions.
IRS Contact Information
IRS Website: www.irs.gov
IRS Telephone Number: 1-800-829-1040
Frequently Asked Questions (FAQs)
Q: What is the difference between the IRS and the SSA?
A: The IRS is the Internal Revenue Service, responsible for collecting taxes and administering tax laws. The SSA is the Social Security Administration, responsible for administering Social Security benefits.
Q: How do I file my taxes?
A: You can file your taxes online, by mail, or through a tax professional.
Q: What is the deadline for filing my taxes?
A: The deadline for filing your taxes is April 15th each year.
Q: What is the difference between a tax audit and a tax investigation?
A: A tax audit is an examination of a taxpayer’s financial records to verify the accuracy of their tax return. A tax investigation is a more formal inquiry into a taxpayer’s financial affairs, often involving allegations of fraud or other criminal activity.
Q: What are the penalties for tax fraud?
A: Penalties for tax fraud can include fines, imprisonment, and the seizure of assets.
Q: How can I get help with my taxes?
A: You can get help with your taxes from the IRS, a tax professional, or a community organization.
Q: What is the IRS Taxpayer Advocate Service?
A: The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that helps taxpayers resolve problems with the IRS.
Q: How do I contact the IRS?
A: You can contact the IRS by phone, mail, or online.
Q: What is the IRS Whistleblower Program?
A: The IRS Whistleblower Program rewards individuals who provide information that leads to the collection of significant tax revenue.
Q: What is the IRS’s role in the Affordable Care Act?
A: The IRS is responsible for administering the individual mandate of the Affordable Care Act, which requires most Americans to have Health insurance.
Q: What is the IRS’s role in the Tax Cuts and Jobs Act?
A: The IRS is responsible for implementing the Tax Cuts and Jobs Act, which made significant changes to the tax code.
Table 1: IRS Tax Forms
| Form Number | Form Name | Description |
|---|---|---|
| 1040 | U.S. Individual Income Tax Return | Used by individuals to file their federal income tax return |
| 1040-EZ | Income Tax Return for Single Filers | Simplified version of Form 1040 for single filers with uncomplicated tax situations |
| 1040-SR | U.S. Tax Return for Seniors | Simplified version of Form 1040 for seniors |
| 1040-X | Amended U.S. Individual Income Tax Return | Used to amend a previously filed tax return |
| W-2 | Wage and Tax Statement | Shows the amount of wages, salaries, and other compensation paid to an employee, as well as the amount of taxes withheld |
| 1099 | Miscellaneous Income | Reports income from sources other than wages, such as interest, dividends, and royalties |
| 1099-INT | Interest Income | Reports interest income received from banks, Savings institutions, and other financial institutions |
| 1099-DIV | Dividends and Distributions | Reports dividends received from corporations |
| 1099-NEC | Nonemployee Compensation | Reports income paid to independent contractors |
Table 2: IRS Penalties
| Penalty | Description |
|---|---|
| Late Filing Penalty | Imposed on taxpayers who file their tax return after the deadline |
| Late Payment Penalty | Imposed on taxpayers who fail to pay their taxes by the deadline |
| Accuracy-Related Penalty | Imposed on taxpayers who make errors on their tax return |
| Fraud Penalty | Imposed on taxpayers who intentionally file a false tax return |
| Failure to Pay Penalty | Imposed on taxpayers who fail to pay their taxes in full |
| Failure to File Penalty | Imposed on taxpayers who fail to file their tax return at all |
| Underpayment Penalty | Imposed on taxpayers who underpay their taxes |
| Failure to Provide Information Penalty | Imposed on taxpayers who fail to provide the IRS with requested information |
| Failure to Deposit Penalty | Imposed on businesses that fail to deposit taxes withheld from employees’ wages |
| Failure to File Information Returns Penalty | Imposed on businesses that fail to file information returns, such as Form 1099 |