Internal Revenue Service

Internal Revenue Service
Name	Internal Revenue Service
Formed	July 1, 1862; 1862, 7, 1 years ago
Preceding1	Bureau of Internal Revenue
Jurisdiction	Federal government of the United States
Headquarters	Washington, D.C.
Employees	~93,000 (2022)
Chief1 name	Daniel Werfel
Chief1 position	Commissioner
Parent department	United States Department of the Treasury
Website	irs.gov

Internal Revenue Service. The Internal Revenue Service is the revenue service for the Federal government of the United States, operating under the Department of the Treasury. Its primary mission is to collect federal taxes and administer the Internal Revenue Code, the foundational body of federal statutory tax law. The agency also oversees various benefit programs, including the Earned Income Tax Credit, and plays a critical role in the nation's fiscal operations.

History

The origins of the agency trace back to the American Civil War, when President Abraham Lincoln and Congress created the office of the Commissioner of Internal Revenue in 1862 to levy an income tax to fund the war effort. This early Bureau of Internal Revenue was made permanent in 1913 with the ratification of the Sixteenth Amendment to the United States Constitution. The agency was comprehensively reorganized in the 1950s, adopting its current name following recommendations in the Hoover Commission report. Key legislative milestones that expanded its scope include the Revenue Act of 1942, the Tax Reform Act of 1986, and the Internal Revenue Service Restructuring and Reform Act of 1998.

Organization and structure

The Internal Revenue Service is headed by a Commissioner appointed by the President of the United States and confirmed by the Senate, with Daniel Werfel serving in the role since 2023. Its headquarters are in Washington, D.C., with major operational centers including the Andover and Austin Compliance Center. The agency is divided into four primary operating divisions: Wage and Investment Division, Large Business and International Division, Small Business/Self-Employed Division, and Tax Exempt and Government Entities Division. Oversight is provided by the Treasury Inspector General for Tax Administration and the Internal Revenue Service Oversight Board.

Functions and responsibilities

The core function of the agency is the administration and enforcement of U.S. federal tax laws as codified in the Internal Revenue Code. This involves processing over 150 million individual tax returns annually, issuing tax refunds, and providing taxpayer assistance. Beyond revenue collection, it administers key provisions of the Affordable Care Act and distributes economic impact payments as authorized by laws like the CARES Act. The agency also conducts audits, offers pre-filing guidance through publications like IRS Publication 17, and operates programs such as the Voluntary Disclosure Practice.

Tax collection and enforcement

Collection activities are supported by the Automated Collection System and the Integrated Collection System. The agency employs various enforcement tools, including tax liens, levies, and garnishment, with serious non-compliance cases referred to the IRS Criminal Investigation division for potential prosecution. It conducts examinations ranging from correspondence audits to field audits of complex entities. The agency also engages in international enforcement through agreements like the Foreign Account Tax Compliance Act and collaborations with the Joint Chiefs of Global Tax Enforcement.

Technology and modernization

Major technological initiatives have included the development of the Electronic Federal Tax Payment System and the modernization of legacy systems through programs like the Business Systems Modernization effort. The agency has expanded e-filing capabilities and deployed advanced analytics and artificial intelligence for fraud detection and case selection. Ongoing challenges include cybersecurity threats and modernizing aging infrastructure, with recent funding from the Inflation Reduction Act aimed at accelerating digital transformation and improving online taxpayer services.

Criticism and controversies

The agency has faced significant scrutiny over its use of liens and levies, particularly regarding the Taxpayer Advocate Service's reports on taxpayer burdens. Major controversies include the IRS targeting controversy involving certain Tea Party movement groups, which led to congressional hearings and investigations by the Federal Bureau of Investigation. Other notable incidents involve the Ernst & Young tax shelter opinions and the Lerner contempt proceedings. Critics, including the Government Accountability Office, have also highlighted challenges with tax gap estimates and the complexity of the United States tax court process.

Category:United States Department of the Treasury Category:Revenue services Category:1862 establishments in the United States