Home The Internal Revenue Service A Full Background on the IRS

A Full Background on the IRS

The Internal Revenue Service (IRS) is the primary tax collecting agency in the United States of America. To understand its history and operations, we must first trace its roots and development over time.

History of the IRS

The roots of the IRS can be traced back to 1862 when President Abraham Lincoln signed the Revenue Act into law, which created the position of Commissioner of Internal Revenue. This office was responsible for collecting taxes on behalf of the government. At this stage, the tax system was still in its infancy, and the federal government relied on tariffs and duties to generate revenue.

The modern-day IRS was created in 1913, with the passing of the 16th Amendment to the US Constitution. This amendment gave Congress the power to impose federal income taxes on American citizens. The IRS became responsible for collecting these taxes, and this remains its primary function to this day.

During World War II, the IRS’s role expanded as it became responsible for administering and collecting taxes to fund the war effort. After the war, the government began to rely on the income tax as its primary source of revenue, and the IRS became a permanent fixture in American society.

Structure of the IRS

The IRS is a bureau of the US Department of the Treasury. It is led by a Commissioner, who is appointed by the President and confirmed by the Senate. The Commissioner serves a term of five years and is responsible for overseeing the agency’s operations and enforcing tax laws.

The IRS has a large workforce spread across the country, with over 80,000 employees in numerous offices and call centers. They handle a diverse range of responsibilities, including answering taxpayer queries, processing tax returns, and collecting taxes from individuals and businesses.

The IRS is organized into three main divisions:

1. Wage and Investment Division: This division is responsible for processing tax returns from individual taxpayers, as well as implementing tax reforms like the Affordable Care Act.

2. Small Business/Self-Employed Division: This division focuses on the taxation of small businesses, self-employed individuals, and independent contractors. They also enforce compliance with employment taxes and oversee the issuance of taxpayer identification numbers.

3. Large Business and International Division: This division is responsible for overseeing the taxation of complex business entities such as corporations, partnerships, and trusts. They also work on international tax issues such as cross-border transactions and transfer pricing.

The IRS also has an Office of Chief Counsel, which provides guidance on tax laws and regulations and represents the agency in legal proceedings related to taxation.

Functions of the IRS

The primary role of the IRS is to collect taxes on behalf of the federal government. This includes not only collecting income taxes but also other forms of federal taxation such as estate, gift, and excise taxes.

The IRS also has a responsibility to enforce tax laws and regulations. This includes auditing taxpayers suspected of underreporting their income or deductions, as well as investigating cases of suspected tax fraud. The IRS can also impose civil or criminal penalties for noncompliance with tax laws and regulations.

The IRS is also responsible for educating taxpayers on their obligations under the tax laws. This includes maintaining a comprehensive website with all necessary information and providing telephone support for taxpayers who have questions or need assistance.

Recent Developments

In recent years, the IRS has come under scrutiny for a variety of reasons. One major issue has been the delay in issuing tax refunds in a timely manner. The COVID-19 pandemic has also resulted in significant changes to the tax system, with multiple rounds of stimulus payments, changes to tax filing deadlines, and numerous other measures aimed at providing relief to taxpayers.

The IRS has also faced criticism for its handling of tax-exempt organizations and political groups in the wake of revelations that the agency had targeted certain groups for additional scrutiny. This led to significant reforms within the agency focused on ensuring impartiality and fairness in the application of tax laws.

One issue that has arisen in recent years is the increasing use of cryptocurrencies for tax evasion. The IRS has taken steps to improve its enforcement efforts in this area, including issuing guidance on the taxation of cryptocurrencies and partnering with other federal agencies to investigate potential tax crimes involving virtual currencies.


The IRS has a long history in the United States and has become an essential part of American society. Its role in collecting taxes and enforcing tax laws has helped ensure that the federal government has a stable source of revenue to fund its operations. Despite some recent controversies, the agency continues to play a vital role in the smooth functioning of the US government.

The Internal Revenue Service (IRS) is the prominent agency of the United States Federal Government, responsible for collecting taxes. When in typical conversation, the IRS is usually attached with disparaging comments, however, the agency is necessary to support a functioning society.

Much of the trepidation that surrounds the Internal Revenue Service stems from an unfamiliarity with the organization, most simply assume it is a government agency out to pillage individuals earnings. If broken down into function, as oppose to result, the IRS dealings may become comprehensible.

The Internal Revenue Service collects taxes through enforcement and interpretation of the United State’s federal tax law. The levying of taxes is the main source of revenue for all forms of government in the United States. In order to provide public services (on a federal level) such as health care, defense, national parks, social security, and transportation infrastructure the government must tax its citizens, and businesses.

Federal taxes are essentially a “toll” that citizens and corporations must pay to use the resources of the United States. Without taxes, our governments would fail to sufficiently supply the population with public services that are necessary to maintain a functioning society.

The Internal Revenue Code (IRC) is the established tax law in America, which covers all forms of federal taxes:income tax, gift taxes, payroll taxes, excise taxes, and estate taxes. The IRC is implemented by the Internal Revenue Service, and enforces a comprehensive tax code to ensure the levying of various federal taxes. Prior to 1874, federal laws were not organized, they were not consolidated, but instead, fragmented into various acts passed by Congress.

Over the ensuing decades the federal laws were codified to establish an organized system. The USC (United States Code) was subsequently adopted, which solidified the federal law system in the United States. The Internal Revenue Code, which fundamentally acts as the framework for the IRS is the 26th of the 50 titles found in the USC.

To clarify the IRS and it’s functions, hierarchy, history, and methods we will breakdown and summarize the appropriate categories:

IRS Hierarchy

The chief executive of the IRS is known as the Commissioner.

Commissioners are appointed by the President, and must be approved by the Senate for ratification purposes.

Commissioners oversee all operations of the IRS:collection of taxes, processing of tax returns, enforcement of tax law, and interpretation of tax laws written by Congress.

The Commissioner serves a 5 year term.

The IRS is an extension of the federal government, the Secretary of the Treasury Department has the authority to administer the IRC, however, the secretary has delegated the majority of responsibility to the Commissioner.

How is the IRS organized?

The IRS is organized into four divisions:Individual taxpayers (wages and investments), small businesses, mid-to large cap corporations, and non profits or government entities. The categories exist because each enterprise is taxed differently.

These four divisions all possess unique operating departments which oversee the activities of the IRS:communicating with taxpayers, processing of tax returns, conduct audits, and collect taxes.

The four divisions that enforce tax laws for the varying categories are over sought by broad departments that impact the entire scope of the IRS. Human Resources, IT department, criminal investigations, and support services are all examples of the broad departments within the IRS.

History of the IRS

The first agency responsible for collecting and enforcing taxes in the United States was Bureau of Internal Revenue.

In 1862 the Bureau of Internal Revenue was disbanded due to income tax repeal following the Civil War.

The IRS was re-established in 1913 following the adoption of the 16th Amendment, which granted taxing power of income to Congress.

The institution of the Internet, and technological advancements of the 21st century, computerized the tax collection process of the IRS.

Contacting the IRS

For general tax inquiries, specific questions regarding tax returns, problems, or status inquiries involving refunds, individuals can call the IRS at 1-800-829-1040.

For similar inquiries involving business taxes call 1-800-829-4933

Cases regarding identify theft (i.e. someone has filed a tax return using an incorrect social security number) contact 1-800-908-4490

Representatives who assist such matters are generally friendly and will help resolve any issues an individual, business, or non profit may have.