Eleanor Finch
The Internal Revenue Service (IRS) is the United States' federal agency responsible for tax collection. The IRS was created following the ratification of the 16th Amendment to the US Constitution in 1913, which established Congress's right to impose a federal income tax. The 16th Amendment was passed by Congress on July 2, 1909, and came into effect on February 3, 1913, with the certification of Secretary of State, Philander C. Knox. This amendment settled the constitutional question of how to tax income, giving Congress broad authority to lay and collect taxes for federal debts, common defence, and general welfare.
| Characteristics | Values |
|---|---|
| Year of origin | 1862 |
| Year of establishment | 1913 |
| Original name | Commissioner of Internal Revenue |
| Current name | Internal Revenue Service |
| Year of name change | 1953 |
| Parent agency | Department of the Treasury |
| Location | Washington, D.C. |
| Computer programming location | Maryland |
| Tax return processing locations | Austin, Texas; Kansas City, Missouri; and Ogden, Utah |
| Number of operating divisions | 4 |
| Number of tax returns processed in 2023 | 271.5 million |
| Amount of revenue collected in 2023 | $4.7 trillion |
| Number of tax return audits closed in 2023 | 582,944 |
| Amount of additional tax from audits in 2023 | $31.9 billion |
| Legal basis | "Positive law" |
| Constitutional basis | Sixteenth Amendment |
| Constitutional basis year | 1913 |
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What You'll Learn
The IRS is a government agency
The Internal Revenue Service (IRS) is a government agency that is part of the US Department of the Treasury. The IRS was created in 1913, following the ratification of the 16th Amendment to the US Constitution, which established Congress's right to impose a federal income tax. The 16th Amendment was passed by Congress on July 2, 1909, and ratified on February 3, 1913. This amendment authorized Congress to impose a tax on income, which led to the creation of the Bureau of Internal Revenue, later renamed the Internal Revenue Service in 1953.
The IRS is responsible for collecting the revenue needed to fund the United States federal government. It processes tax returns, audits tax returns, and helps taxpayers understand and meet their tax obligations. The IRS also enforces the law with integrity and fairness, ensuring that those who are unwilling to comply pay their fair share. In the fiscal year 2023, the IRS collected almost $4.7 trillion in revenue and processed more than 271.5 million tax returns.
The IRS is headquartered in Washington, D.C., and has three main centers for processing paper and e-filed tax returns located in Austin, Texas; Kansas City, Missouri; and Ogden, Utah. The agency has undergone numerous reforms and reorganizations since its establishment, including a significant restructuring in the 1990s. The IRS also functions under four major operating divisions: the Large Business & International (LB&I) division, the Small Business/Self-Employed (SB/SE) division, the Wage & Investment (W&I) division, and the Tax Exempt & Government Entities (TE/GE) division.
The IRS is organized under section 7801 of the Internal Revenue Code, which grants the Secretary of the Treasury full authority to administer and enforce internal revenue laws. The Secretary also has the power to create an agency to enforce these laws, and the IRS was created based on this legislative grant. The IRS is, therefore, a government agency established by "positive law" through a congressionally mandated power. This is further supported by section 7803(a) of the Internal Revenue Code, which explicitly provides for the appointment of a Commissioner of Internal Revenue to administer and supervise the execution and application of internal revenue laws.
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The 16th Amendment
The road to the 16th Amendment's ratification began in 1894 with the Wilson-Gorman Tariff Act, which included an income tax provision of 2% on incomes over $4,000. However, this act was short-lived, and it was eventually repealed in 1872. In 1909, President William H. Taft proposed a new income tax of 2% on corporations, sparking debate among senators and citizens. Many citizens in the West and South supported an income tax, believing it would ease the burden on those less fortunate.
The Progressive Era, which began at the end of the 19th century, played a crucial role in the push for the 16th Amendment. Progressive groups advocated for a federal income tax, arguing that it would be fairer for the wealthy to contribute more. Additionally, the victory of the Democratic Party in the 1912 presidential election facilitated the amendment's ratification. From 1909 to 1913, the required thirty-six states out of the then forty-eight ratified the amendment, and on February 3, 1913, it was formally accepted into the Constitution.
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The Secretary of the Treasury
The Internal Revenue Service (IRS) is a bureau of the Department of the Treasury. The IRS was created to enforce the internal revenue laws and is led by the Commissioner of Internal Revenue, who is appointed to a five-year term by the President of the United States.
The Department of the Treasury is headed by the Secretary of the Treasury, who is a member of the President's Cabinet. The Secretary of the Treasury is nominated by the President and confirmed by the Senate. The current Secretary of the Treasury is Janet Yellen, who was previously the chair of the Federal Reserve. The Secretary of the Treasury has the authority to administer and enforce internal revenue laws and can create an agency to enforce such laws.
The position of Commissioner of Internal Revenue was created in 1862 by President Abraham Lincoln to assess the nation's first income tax to fund the Civil War. The income tax was repealed in 1872, but the office of the Commissioner remained. In 1913, the Sixteenth Amendment to the U.S. Constitution was ratified, authorizing Congress to impose a tax on income. The IRS was then given the responsibility for collecting and enforcing income taxes.
The IRS is responsible for collecting federal taxes and administering the Internal Revenue Code, the main body of federal statutory tax law. 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. The IRS also engages in formal rulemaking to provide its own interpretation of statutes or when the statute directs the Secretary of the Treasury to do so.
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Taxpayer rights and obligations
The Internal Revenue Service (IRS) was created following the ratification of the 16th Amendment to the US Constitution in 1913, which authorised Congress to impose a tax on income. The IRS is, therefore, a body established by "positive law" as it was created through a congressionally mandated power.
Every taxpayer has a set of fundamental rights and obligations when dealing with the IRS. These include:
- The right to be informed: Taxpayers have the right to receive clear explanations of tax laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They should also be informed of IRS decisions about their tax accounts and receive clear explanations of the outcomes.
- The right to quality service: Taxpayers are entitled to receive prompt, courteous, and professional assistance from the IRS. They should be spoken to in a way they can easily understand and receive clear and easily comprehensible communications. They also have the right to speak to a supervisor about inadequate service.
- The right to pay no more than the correct amount of tax: Taxpayers should only pay the amount of tax legally due, including interest and penalties, and ensure that the IRS applies all tax payments properly.
- The right to challenge the IRS's position and be heard: Taxpayers can raise objections and provide additional documentation in response to formal IRS actions or proposed actions. The IRS is expected to consider these objections and documentation promptly and fairly and provide a response if it disagrees with the taxpayer's position.
- The right to appeal an IRS decision in an independent forum: Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including penalties. They have the right to receive a written response from the Office of Appeals and generally have the right to take their cases to court.
- The right to finality: Taxpayers have the right to know the maximum amount of time they can challenge the IRS's position and the maximum time the IRS has to audit a particular tax year or collect tax debt. They should also be informed when the IRS has finished an audit.
- The right to privacy and confidentiality: Taxpayers can expect that any information provided to the IRS will not be disclosed unless authorised by the taxpayer or by law. They have the right to expect appropriate action against those who wrongfully disclose taxpayer return information.
- The right to retain representation: Taxpayers can choose to be represented by an authorised representative of their choice when dealing with the IRS. If they cannot afford representation, they can seek assistance from a Low-Income Taxpayer Clinic.
- The right to a fair and just tax system: The tax system should consider facts and circumstances that might affect a taxpayer's underlying liabilities, ability to pay, or ability to provide information in a timely manner.
In addition to these rights, taxpayers also have certain obligations. These include:
- Knowing their tax reporting obligations and seeking instructions from the relevant department when uncertain.
- Keeping accurate and complete business records.
- Filing returns and paying taxes on time.
- Providing accurate information on tax returns.
- Substantiating claims for refunds.
- Paying all taxes on time after closing a business and requesting cancellation of the tax account.
- Responding to communications from the department in a timely manner.
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The IRS's role and history
The IRS, or Internal Revenue Service, is a bureau of the Department of the Treasury and is responsible for collecting the revenue needed to fund the United States federal government. The IRS was created in 1953 when the Bureau of Internal Revenue was renamed. The Bureau of Internal Revenue was created in 1913 after the 16th Amendment to the U.S. Constitution was ratified, authorizing Congress to impose a tax on income.
The origins of the IRS can be traced back to the Commissioner of Internal Revenue, a federal office created in 1862 to assess the nation's first income tax to fund the American Civil War. This was a temporary measure that funded over a fifth of the Union's war expenses and was allowed to expire a decade later.
In 1909, progressives in Congress attached a provision for an income tax to a tariff bill. Conservatives, hoping to kill the idea, proposed a constitutional amendment enacting such a tax, believing it would never receive ratification by three-fourths of the states. However, the amendment was ratified by one state legislature after another, and on February 25, 1913, with the certification by Secretary of State Philander C. Knox, the 16th amendment took effect.
In the first year after the ratification of the 16th Amendment, no taxes were collected. Instead, taxpayers completed the form, and the IRS checked the form for accuracy. The IRS's workload jumped by tenfold, 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.
The IRS is headquartered in Washington, D.C., and does most of its computer programming in Maryland. It processes paper tax returns sent by mail and e-filed tax returns at three IRS center locations: Austin, Texas; Kansas City, Missouri; and Ogden, Utah. In fiscal year 2023, the IRS collected almost $4.7 trillion in revenue and processed more than 271.5 million tax returns.
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Frequently asked questions
The IRS is not explicitly mentioned in the US Constitution. However, the 16th Amendment, ratified in 1913, established Congress's right to impose a federal income tax, and the IRS was created to enforce these laws.
The 16th Amendment to the US Constitution grants Congress the right to impose a federal income tax. It was passed by Congress on July 2, 1909, and ratified on February 3, 1913.
The IRS is responsible for collecting revenue through federal income taxes to fund the US federal government. They help taxpayers understand and meet their tax obligations, while also ensuring that those unwilling to comply pay their fair share.
