Do you know what the Internal Revenue Service (IRS) is?
The Internal Revenue Service (IRS) is a government agency that follows tax rules and collects federal taxes from people and businesses in the United States. As part of the U.S. Treasury Department, the Internal Revenue Service (IRS) ensures that the Treasury’s duties are met under the Internal Revenue Code (IRC). The office has been around since 1862 and handles gift, excise, and estate taxes. The IRS regularly checks to see if taxpayers are following tax rules.
The Internal Revenue Service (IRS) and How It Works
In 1862, President Abraham Lincoln set up the Office of the Commissioner of Internal Revenue to collect fees for the war. This was the start of the IRS. Congress got the power to make income tax rules in 1913. This made the Bureau of Internal Revenue possible. In the 1950s, the organization changed its name to the Internal Revenue Service. It has since undergone many changes and reorganizations to become what it is today.
The agency’s job is to enforce tax rules and collect federal taxes from all Americans, whether individuals or businesses. Its headquarters are in Washington, D.C. This is done by getting people to make annual tax returns and processing them. The agency aims to help people understand federal tax laws, such as those dealing with estates, gifts, and extra taxes. This is what the government says:
People who pay taxes in the U.S. must follow the tax rules that Congress makes.
Taxpayers need to know what they need to do to pay their taxes and do it.
The IRS is there to help taxpayers who do the right thing and ensure that taxpayers who don’t do the right thing pay their fair share.
4.4 trillion dollars
The amount of tax money the IRS got in the tax year 2023. This is equal to about 99% of the country’s total income.
One of the main jobs of the IRS is to process federal tax returns and collect money from people and businesses who owe taxes. Tax refunds are given by the IRS to people who owe money to the government. The IRS said the following about the week ending October 27, 2023:
- Getting 160.49 million individual tax returns
- 161.16 million individual tax forms to process
- Giving back $319.66 billion to 104.66 million people
The IRS works with a budget that Congress has approved. This is split into four accounts: Services for Taxpayers, Enforcement, Operations Support, and Modernization of Business Systems. The money given to each section can’t be moved to other parts. The group asked for a $14.14 billion budget for the fiscal year 2024 and asked that the way money is allocated be changed so that it can be used to cover costs in other areas.
A commissioner is in charge of the IRS. On March 13, 2023, Danny Werfel was named the 50th commissioner.
Tax Returns and Payment
Putting in your taxes
Form 1040: U.S. Individual Tax Return Definition, Types, and Use is what most people use to file taxes. People 65 and older can use Form 1040-SR: Tax Return for Seniors instead. These forms are used to report income and determine if more taxes need to be paid or if the taxpayer is refunded.
Form 1120: U.S. Corporation Income Tax Return is what corporations use to report their income and tax obligations. Depending on the type of company, the form can look different, such as:
- For cooperative groups, Form 1120-C is the U.S. income tax return.
- In this case, Form 1120-F is a foreign corporation’s U.S. income tax return.
- You can file your U.S. income tax return for homeowners associations on Form 1120-H.
- Form 1120-L is the income tax return for a U.S. life insurance company.
- Form 1120-S is a U.S. tax return for a S company.
People and businesses may also have to fill out and send in extra forms along with their primary tax return. These can be schedules, appendices, and documents the issuer gives, like W-2s and 1099s.
Individuals can send in their tax returns by mail or online using tax software made just for regular people. The agency still takes paper returns, but taxpayers are strongly encouraged to file online to avoid delays. Remember that the government does not support any one program or filing software. All other ways of making tax returns have been surpassed by e-filed returns. 7 Remember that people can also use the help of tax experts, like tax preparers or lawyers.
Having to Pay Taxes
People can pay their taxes straight to the IRS with a credit or debit card, an electronic transfer of funds from their bank accounts, or both. You can also use same-day bank wires or electronic cash withdrawals when you use the Electronic Federal Tax Paying System to e-file your return. The IRS also lets people and businesses set up payment plans.
People can also mail a personal check, cashier’s check, or money order to the U.S. Treasury. The payment must come with the following information:
- Your name and address
- Number to call during the day
- The number for your workplace or your Social Security number (SSN)
- The tax year
- Tax form or letter number that goes with it
Service of Internal Revenue. “Money Order or Check.”
In the same way that the IRS highly suggests paper returns, electronic payments should also be made to avoid delays.
People can also pay in cash by calling (844) 545-5640, Monday through Friday, 7 a.m. to 7 p.m. ET, to make an appointment to visit an IRS Taxpayer Assistance Center in person. People who owe taxes should call 30 to 60 days before they are due to pay.
Also, Dollar General, Family Dollar, CVS Pharmacy, Walgreens, Pilot Travel Centers, 7-Eleven, Speedway, Kum & Go, Royal Farms, Go Mart, Rite Aid, Stripes, TAA Operating, Walmart, The Kroger Co., Circle K, and Kwik Trip will take cash payments. They have to wait for the IRS to give them a payment code, which they use when making the payment. Remember that the most you can pay in a single payment is $500.
The IRS’s fiscal year is from October 1 to September 30.
Audits by the Internal Revenue Service (IRS)
As part of its job to uphold the law, the IRS checks a certain number of tax returns every year. Audits ensure that people give the IRS correct information in line with tax laws. The IRS picks taxpayers randomly or targets explicitly those whose returns are linked to those of other taxpayers who have already been examined. There may also be red flags that tell the IRS to do a check in other situations.
An auditor looks over the report as part of the audit process. This person can either accept the return or ask for a review. In the second case, the taxpayer is mailed a notice. Reviewing paperwork is part of the audit, which can happen by mail, in person at an IRS office, or somewhere else, like the taxpayer’s home, business, or accountant’s office.
While no one thing guarantees an IRS audit every year, the following are some red flags that may lead to one:
- Not reporting the correct amount of income
- Trying to get more tax breaks than usual, especially for business-related ones
- Making gifts to charities that are too big compared to their income
- Getting money for rental property loses
- Someone may also check up on you if you own a business or make a lot of money.
As of the end of the 2022 fiscal year, the IRS had done 708,309 investigations. The IRS looked at 0.49% of individual tax returns and 0.84% of business tax returns as part of these audits. Because of these reviews, the government got an extra $30.2 billion in tax money. Seventy-eight percent of audits were done by mail, while twenty-one percent were done in person.
In case you get inspected, make sure you keep all of your papers in a safe place. During an audit, the IRS may look at your tax records from the last three years. If they find a big mistake, they may go back even further. Most of the time, the government doesn’t look back more than six years.
What You Need to Do to Get in Touch with the IRS
Through the mail
Should you file your tax return by mail, the address you should use will depend on where you live and whether you expect a tax rebate. On the IRS page, there is a list.
On the IRS website, there is a list of mailing addresses you can use to send an application or a payment.
On the phone or online
People can call the IRS at (800) 829-1040, Monday through Friday, 7 a.m. to 7 p.m. local time. There are also other toll-free numbers for companies and other uses. But it might be hard to get through to a natural person. Amy Northard, a certified public accountant (CPA), says in her blog that you’ll first have to answer a set of automatic questions. If her process was correct, Investopedia checked it.
Use the Interactive Tax Assistant on the IRS website to get help with various tax questions.
Face to Face
You can also call your local IRS office to make a time to meet in person. The IRS website has a “locator” page where you can type in your ZIP code to find out where the office is and how to call it.
How long has the IRS been around?
President Abraham Lincoln set up the IRS in 1862. To pay for the Civil War, he raised taxes on income. The tax was taken away in 1872, brought back in 1894, and later ruled illegal by the U.S. Supreme Court in 1895. The federal income tax was brought back in 1913 by the 16th Amendment to the U.S. Constitution.
How should I file my tax return?
It’s best to file your taxes online, which 93.8% of people did during the IRS’s fiscal year 2022. You can still put in a paper tax return, but it will take longer for you to get your refund.
How am I going to pay my tax?
Tax payments made electronically, either from your bank account or a debit or credit card, are the most common way to do it. You can also pay by check or money order or in person with cash if you’d like.
How likely is it that the IRS will check your records?
In 2022, 0.49% of individual tax forms were checked by a CPA. But your chances are better if you make a lot of money. As of the 2022 tax year, the IRS had looked at the tax records of 8.5% of people who made $10 million or more between 2012 and 2020. However, no one thing will guarantee that the IRS will audit you.
Conclusion
- The IRS is a federal agency that collects federal taxes and ensures that U.S. tax rules are followed.
- The IRS does most of its work with income taxes for people and businesses.
- People can file and pay taxes in person, online, or by mail.
- The IRS regularly checks people’s tax returns randomly or if it finds problems with them.
- You can call, write, email, or make an appointment to meet with the IRS in person.
