Published Apr 29, 2024 The Internal Revenue Service (IRS) is a U.S. government agency responsible for the collection of taxes and enforcement of tax laws. Established in 1862 by President Abraham Lincoln, the agency operates under the authority of the Department of the Treasury. The IRS ensures that individuals, corporations, and other entities comply with the U.S. tax code and collects the federal government’s primary source of revenue. The primary function of the IRS includes the administration of the Internal Revenue Code, collecting federal income taxes, corporate taxes, excise taxes, and employment taxes. Additionally, the IRS issues tax refunds, conducts audits, and enforces tax laws against tax evasion or fraud. The agency also offers taxpayer assistance services, providing guidance on tax laws and filing procedures. Consider Jane Doe, who works as a software developer. Every year, she must file an income tax return with the IRS to report her earnings, taxes withheld, and any deductions or credits she may qualify for. Jane receives a Form W-2 from her employer, detailing her annual earnings and the amount of taxes withheld from her paycheck. She uses this information to complete her tax return, either electronically via IRS e-file or by mailing a paper form. If Jane has overpaid her taxes throughout the year, she will receive a refund from the IRS. Conversely, if she has underpaid, she will owe additional taxes. The IRS plays a crucial role in the functioning of the U.S. government by collecting the revenue needed to fund government operations and public services. Without effective tax collection, the government would be unable to fulfill its responsibilities, including defense, infrastructure, education, and social programs. Moreover, the IRS helps to enforce tax laws, ensuring fairness by requiring all entities to pay their share of taxes. This enforcement helps to prevent the tax burden from disproportionately falling on honest taxpayers. The IRS uses various methods to select taxpayers for audits, including random selection, computerized screening, and comparison of tax returns to information reports (such as Forms 1099 and W-2). Specific activities or discrepancies, such as unusually high deductions compared to income, can also trigger an audit. However, being selected for an audit does not always imply wrongdoing. Taxpayers have specific rights outlined in the Taxpayer Bill of Rights, which includes the right to be informed, the right to quality service, the right to pay no more than the correct amount of tax, the right to challenge the IRS’s position, and the right to privacy and confidentiality among others. These rights ensure taxpayers are treated fairly and know what to expect during their interactions with the IRS. Yes, the IRS offers various forms of assistance to taxpayers. This includes the IRS website, which contains forms, publications, and direct guidance on a wide range of tax issues. Additionally, the IRS operates taxpayer assistance centers and a toll-free telephone service for more personalized help. The IRS also supports the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs, which offer free tax help to qualifying individuals. If you’re unable to pay the full amount of taxes owed by the due date, the IRS offers options to help manage the payment. Taxpayers can request an installment agreement, which allows them to pay over time. It is essential to contact the IRS to discuss arrangements rather than ignoring the obligation, as failing to pay taxes can result in penalties and interest.Definition of Internal Revenue Service (IRS)
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Why the IRS Matters
Frequently Asked Questions (FAQ)
How does the IRS decide who to audit?
What rights do taxpayers have when dealing with the IRS?
Can the IRS provide assistance for taxpayers who have questions or need help filing their taxes?
What happens if you can’t pay your taxes in full by the due date?
Economics