Internal Revenue Service

From Wikipedia, the free encyclopedia

(Redirected from U.S. Internal Revenue Service)

"IRS" redirects here. For other uses, see IRS (disambiguation).

The Internal Revenue Service (IRS) is the United States government agency that collects taxes and enforces the internal revenue laws. The IRS is a bureau of the Department of the Treasury. The official U.S. Treasury regulations provide (in part):

The Internal Revenue Service is a bureau of the Department of the Treasury under the immediate direction of the Commissioner of Internal Revenue. The Commissioner has general superintendence of the assessment and collection of all taxes imposed by any law providing internal revenue. The Internal Revenue Service is the agency by which these functions are performed.<ref>26 C.F.R. section 601.101(a) (emphasis added).</ref>

1 History
2 Administrative functions
3 Tax collections
4 Outsourcing collections
5 Legal status and authority
6 See also
7 Notes
8 Further reading
9 External links

[edit] History

[edit] Bureau of Internal Revenue

In 1862, during the Civil War, President Lincoln and Congress created the office of Commissioner of Internal Revenue and enacted an income tax to pay war expenses (see Revenue Act of 1862). The position of Commissioner still exists today and he is the head of the Internal Revenue Service.

The organization created to enforce these taxes was named for the internal revenue to be collected (and was formerly called the "Bureau of Internal Revenue"), in contrast to U.S. government institutions that collected external revenue through duties and tariffs. The income tax was repealed 10 years later. In 1894, Congress revived the income tax, but the following year the United States Supreme Court ruled, in Pollock v. Farmers' Loan & Trust Co., that taxes on capital gains, dividends, interest, rents and the like were direct taxes on property, and that the statute in question was unconstitutional because it had not apportioned the direct taxes among the states according to population. In 1913, however, the states ratified the 16th Amendment, which removed the requirement that income taxes (whether considered direct or indirect taxes) be apportioned by population.

The IRS has its National Capital offices in the greater Washington, DC area, and in particular does most of its computer programming in Maryland. It operates various service centers around the country (currently ten; these are the locations to which taxpayers mail their returns); these centers do the actual tax processing (by running the computer programs written by the National Office); different types of tax processing take place in various centers (such as the distinction between individual and business tax processing). It also operates three computer centers in different locations around the country.

[edit] Name change in the 1950s and reorganization

In the 1950s, career professional employees replaced the patronage system. Currently, only the IRS Commissioner and Chief Counsel are selected by the President and confirmed by the Senate. In 1952 the Bureau of Internal Revenue name was changed to the "Internal Revenue Service" to emphasize "service" to taxpayers.

[edit] Reorganization of the late 1990s

As a by-product of hearings on abusive conduct by IRS employees, Congress enacted the Internal Revenue Service Restructuring and Reform Act of 1998.<ref>Pub. L. No. 105-206, 112 Stat. 685 (July 22, 1998).</ref> As a result of that Act the IRS now functions under four major operating divisions: Large & Mid-Size Business (LMSB), Small Business / Self-Employed (SB/SE), Wage and Investment (W&I), and Tax Exempt & Government Entities (TE/GE). The IRS also includes a criminal law enforcement division.

[edit] Flooding at IRS headquarters building

Image:IRS building on constitution avenue in DC.jpg

IRS building on Constitution Avenue in Washington, D.C..

The main headquarters building of the IRS is located at 1111 Constitution Avenue, N.W. in Washington, D.C., near the Old Post Office. The IRS headquarters building was closed in June 2006 as a result of heavy flooding. According to a July 12, 2006 letter from Senator Max Baucus (Dem.-Montana), a ranking member of the U.S. Senate Finance Committee, the sub-basement of the building was filled with water to a depth of twenty feet, and electrical and maintenance equipment in the sub-basement was about 95% damaged or destroyed. The IRS and the General Services Administration announced that the building would remain closed through the end of 2006. The employees who worked in the building -- numbering over two thousand -- have been temporarily transferred to other offices in the Washington, D.C. area.

On November 20, 2006, CCH Incorporated reported that the IRS stated (on November 17) that the move back to the headquarters building is scheduled to begin, in phases, on December 8.

[edit] Commissioner

The current Commissioner of Internal Revenue is Mark W. Everson, who was confirmed by the U.S. Senate on May 1, 2003.

[edit] Administrative functions

In addition to collection of revenue and pursuing tax cheaters, the IRS issues administrative rulings such as revenue rulings and private letter rulings. In addition the Service publishes the Internal Revenue Bulletin containing the various IRS pronouncements. The controlling authority of regulations and revenue rulings allows taxpayers to rely on them. A private letter ruling is good for the taxpayer to whom it is issued, and gives some explanation of the Service's position on a particular tax issue. As is the case with all administrative pronouncements, taxpayers sometimes litigate the validity of the pronouncements, and courts sometimes determine a particular rule to be invalid where the agency has exceeded its grant of authority. The IRS also issues formal pronouncements called Revenue Procedures that among other things tell taxpayers how to correct prior tax errors.

More formal rulemaking to give the Service's interpretation of a statute or when the statute itself directs that the Secretary of the Treasury shall provide, IRS undergoes the formal regulation process with an NPRM (Notice of proposed rulemaking) published in the Federal Register announcing the proposed regulation, the date of the in person hearing and the process for interested parties to have their views heard either in person at the hearing in Washington, D.C., or by mail. Following the statutory period provided in the Administrative Procedure Act (an abiding interest of Justice Scalia's dissenting opinions) the Service decides on the final regulations "as is," or as reflecting changes, or sometimes withdraws the proposed regulations. Generally, taxpayers may rely on proposed regulations until final regulations become effective. For example, human resource professionals are relying on the October 4, 2005 Proposed Regulations (citation 70 F.R. 57930-57984[1]) for the Section 409A on deferred compensation (the so-called Enron rules on deferred compensation to add teeth to the old rules) because regulations have not been finalized.

Consumers should be aware that the IRS never sends out unsolicited emails, and under no circumstances, requests credit card information or PIN numbers through email. Persons receiving emails that claim to be from the IRS should not attempt to visit any site contained within the email and should report suspicious emails to the IRS. [2]

[edit] Tax collections

Summary of Collections before Refunds by Type of Return, Fiscal Year 2003:

Type of Return	Number of Returns	Gross Collections (Millions of US$)
Individual Income Tax	130,728,360	987,209
Corporate Income Tax	5,890,821	194,146
Employment Taxes	29,916,033	695,976
Gift Tax	287,456	1,939
Excise Taxes	812,483	52,771
Estate Tax	91,679	20,888

In fiscal year 2004, the IRS collected $43.1 billion in enforcement revenue. This is an increase of $5.5 billion (15 percent) from fiscal year 2003.

Recently, the IRS has altered its policies. The current Service plus Enforcement equals Compliance motto has led to more investigations of abusive tax schemes.

[edit] Outsourcing collections

Beginning in September 2006, the IRS will begin to outsource the collection of taxpayers debts to private debt collection agencies. Opponents to this change note that the IRS will be handing over personal information to these debt collection agencies, who are being paid between twenty-two and twenty-four percent of the amount collected. Opponents are also worried about the agencies' being paid on percent collected because it will encourage the collectors to use pressure tactics to collect the maximum amount. IRS spokesman Terry Lemons responds to these claims saying the new system "is a sound, balanced program that respects taxpayers' rights and taxpayer privacy." Currently there are other state and local agencies that are using private collection agencies and have not had any problems. D. Caterinicchia, IRS moves ahead on debt-collection plan

[edit] Legal status and authority

For more details on this topic, see Tax protester statutory arguments.

Many tax protesters claim that because the IRS itself was not created by statute and because the IRS has no legal capacity to sue or be sued, the IRS is not a federal government agency. Some claim it is a Puerto Rican trust.<ref>Mitchell, Paul. 31 Questions and Answers about the Internal Revenue Service. Supreme Law Library. Retrieved on 2006-08-16.</ref> The courts have uniformly rejected such arguments.

In another argument, tax protesters claim that IRS employees do not have the authority to assert penalties -- basing the argument on Internal Revenue Code section 6020(b)(1) which states:

Authority of Secretary to execute return.

If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.

Some protesters contend that this provision shows that IRS agents have no authority to impose penalties unless they have a delegation from the Secretary of the Treasury, although the logic of the argument is unclear given that the function of imposing penalties is a separate function from that of preparing section 6020(b) returns. However, the court has rejected the argument, and ruled that an IRS Revenue Agent "plainly falls" within the cited Treasury regulation.

[edit] See also

[edit] Notes

[edit] Further reading

Davis, Shelley L., Matalin, Mary. Unbridled Power: Inside the Secret Culture of the IRS. New York: Harper Collins. ISBN 0-88730-829-5.
Johnston, David Cay (2003). Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich - and Cheat Everybody Else. New York: Portfolio. ISBN 1-59184-019-8.
Rossotti, Charles O. (2005). Many Unhappy Returns: One Man's Quest To Turn Around The Most Unpopular Organization In America. Cambridge: Harvard Business School Press. ISBN 1-59139-441-4.
Roth, William V., Jr., Nixon, William H. (1999). The Power to Destroy. New York: Atlantic Monthly Press. ISBN 0-87113-748-8.

[edit] External links

Internal Revenue Service Official website
IRS Abuse Reports Claimed accounts of abuses against U.S. citizens by the IRS
Tax Protester FAQ by Dan Evans rebuts claims of the illegitimacy of the income tax and the IRS
Americans for Fair Tax argues for the replacement of the income tax with a consumption tax
NonprofitLegalCenter.com Helpful Resources on 501(c)(3) Tax Exempt Status - Legal Assistance, Helpful Newsletter, and Links.
IRS tax forms Description
Internal Revenue Service Fan website for IRS with RSS News, Forums and RSS blogs.
Tax Information for Nonprofit Corporations Tax rulings and information for Nonprofit Corporations
IRS costs government $200 million for software error
Fair Tax ScoreCard List of congressional leaders inclination regarding the Fair Tax