What Is The Internal Revenue Service (IRS)?

How The Internal Revenue Service (IRS) Works.

What is the Internal Revenue Service [IRS]?

The Internal Revenue Service is the revenue service for the United States federal government, which is responsible for collecting U.S. federal taxes and administering the Internet Revenue Code, the main body of the federal statutory tax law. 

Established in 1862, the agency also handles gift, excise, and estate taxes. The IRS routinely conducts audits to ensure that taxpayers comply with tax laws.

The IRS routinely conducts audits to ensure that taxpayers comply with tax laws.
  • The IRS is a federal agency responsible for collecting federal taxes and enforcing U.S. tax laws.
  • Taxpayers can file and pay their taxes electronically, by mail, or in person.
  • Most of the work of the Internal Revenue Service  involves individual and corporate income taxes.
  • The IRS routinely audits taxpayers randomly or if it detects irregularities in their tax return.
  • You can contact the IRS by phone, by mail, online, or in person by making appointment.

What Does IRS do?

The Internal Revenue Service [IRS] mission is to provide America’s taxpayers top quality services by helping them understand and meet their tax responsibilities and to enforce the law with integrity and fairness to all.

How the Internal Revenue Service [IRS] Works?

The IRS traces its roots back in 1862 when president Abraham Lincoln created the commissioner of Internal Revenue to collect taxes to fund the war. In 1913, congress was given the power to enact income tax laws, paving the way for the Bureau of Internal Revenue. The agency, The agency, whose name was changed to the Internal Revenue Service in the 1950s, went through a series of changes and reorganization to what it is today.

Based in Washington, D.C., the agency’s mission is to enforce tax laws and collect federal taxes from all taxpayers in the United States, including individuals and corporations. This is done by collecting and processing annual tax returns from tax filers. The agency aims to help taxpayers understand how federal tax laws work, including those involving gifts, excise taxes, and estates. According to the agency.
  • U.S. taxpayers must comply with tax laws that are passed by U.S. congress
  • The IRS is designed to help compliant taxpayers and ensure that those who aren’t compliant pay their sharer
  • Taxpayers must understand and meet their tax obligations 
$4.1 trillion is the amount of the tax revenue collected by the IRS each year. This represents about 96% of the country’s gross receipts.

Processing federal tax returns and collecting revenue from individual and corporate taxpayers is one of main roles of IRS. In case where a taxpayer is owned money, the IRS issue tax refunds . For the week ending feb. 24, 2023, the IRS reported:
  • Receiving 45.98 million individual returns
  • Processing 45.72 million individual returns
  • Issuing 35.14 million refunds totaling $108.20 billion 
The IRS operates on a budget that is approved by Congress. This is divided into four different accounts: Taxpayers Services, Enforcement, Operations Support and Business System Modernization.

The money allotted to each cannot be reallocated to other sections. The agency requested a budget of $14.1 billion for the 2023 fiscal year and requested that the allocation structure be changed so that money can’t be moved to support costs in other areas.

What Does the IRS do with Tax Money?

The federal taxes you pay are used by government to invest in the country and to provide goods and services for the benefits of American people. 

The three biggest categories of expenditures are: Major health programs, such as Medical, Social security and Medicaid.

How to Connect with the Internal Revenue Service [IRS]

By Mail

If you file a tax return by mail , your state of residence and whether or not you are expecting a tax refund will determine the address that you should use. There is a list on the IRS website.

If you send an application or a payment, there is also a list on the IRS website of mailing address depending on your purpose.

By Phone or Online 

Individual can contact the IRS by phone at (800) 829-1040, Monday through Friday, 7am to 7pm local time, and there are other toll-free numbers for businesses and other purposes.

Tax Filing and Collection 

Filing Your Taxes

The majority of individuals taxpayers use Form 1040: U.S. Individual Tax Return Definition, Types and Use to file their taxes and those who are 65 and older may use Form 1040-SR: Tax Return For Seniors. These forms are used to report income and determine whether any additional taxes are owned or if a refund is due to the taxpayers.

Corporations use Forms 1120: US. Corporation Income Tax Return to report their income and tax liabilities. There are variations of the form, depending on the type of corporation, including:
  • Form 1120-C: U.S. Income Tax Return for Cooperative Association
  • Form 1120-F: U.S. Income Tax Return of a Foreign Corporation
  • Form 1120-H: U.S. Income Tax Return for Homeowners Association
  • Form 1120-L: U.S. Life Insurance Company Income Tax Return
  • Form 1120-S: U.S. Tax Return for an S corporation 
Individual and corporate taxpayers may also be required to complete and attach additional forms to their main filling, including schedules, addendums, and issuer provided documents, such as a W-2 and/or 1099s.

Taxpayers may file returns by mail or electronically with special tax preparation software designed for consumer use. Although the agency still accepts paper returns, it strongly recommends that taxpayers file electronically to avoid delays. Keep in mind that the agency does not endorse any particular platform or filing software.

The number of returns that are e-filed continues to grow, and the overwhelming majority are now filed this way. Keep in mind that taxpayers may also use the services of tax professionals, such as tax preparers or accountants.

Paying Your Taxes

Individual taxpayers can pay their directly to IRS through an electronic transfer of funds from their bank accounts or by using a credit or debit card. Other methods include same day bank wires or electronic funds withdrawals at the time that you e-file your return. Business that make large payments must enroll in and use the Electronic Federal Tax Paying System.

Taxpayer’s may also mail in a personal check, cashier’s check, or money order payable to U.S. Treasury. The following information must accompany the payment
  • Name and address
  • Daytime phone number
  • Social Security Number (SSN) or employer identification number (EIN)
  • Tax year
  • Related tax form or notice number 
Just like paper returns, the IRS strongly recommends making electronic payments to avoid any delays.

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