The Internal Revenue Service (IRS) is part of the U.S. Treasury Department. Its job is to enforce the Internal Revenue Code (IRC), manage federal tax laws, and collect taxes from individuals and businesses in the U.S. The IRS collects various taxes, including gift, excise, estate, and income taxes, and regularly performs audits to make sure taxpayers follow the tax laws.
History
In 1862, President Abraham Lincoln established the Office of Commissioner of Internal Revenue to gather taxes for the Civil War. In 1913, Congress gained the authority to create income tax laws, leading to the formation of the Bureau of Internal Revenue. In the 1950s, the agency’s name was updated to the Internal Revenue Service.
Gathering IRS
The IRS gathers estimated taxes from workers during the year through payroll deductions and quarterly payments from businesses based on their tax filings. Each year, usually by April 15th, individuals and businesses file an annual return to balance what they have paid with what they actually owe.
If a taxpayer pays too much, the IRS sends a tax refund. If they owe money, it must be paid with their yearly tax return. The IRS website provides details on federal tax laws. U.S. taxpayers need to follow the tax laws made by Congress and fulfill their tax duties.
IRS Audits
The IRS checks a portion of income tax returns every year to enforce tax laws. They randomly choose some taxpayers for audits or focus on those whose returns connect to others being audited. There isn’t one specific reason for an audit, but certain warning signs can lead to a review.
- Not reporting the correct income amount
- Claiming too many deductions, especially for business
- Making large charitable donations that don’t match income
- Claiming losses from rental properties
The audit starts when an auditor checks the tax return. The auditor can either approve the return or ask for a deeper review by a special team. If a further review is needed, the taxpayer will receive a notice by mail. The audit looks at documents and can happen by mail or in person at an IRS office, the taxpayer’s home, their business, or their accountant’s office.
Conclusion
The IRS was created to gather funds for the Civil War. It is a part of the U.S. Department of the Treasury, responsible for enforcing and managing federal tax laws, and it works with a budget set by Congress.