Internal Revenue Service
Infobox Government agency
agency_name = Internal Revenue Service
nativename = IRS
abbreviation = IRS
logo_width = 160px
seal_width = 140px
July 9, 1953
preceding1 = Bureau of Internal Revenue
Federal government of the United States
employees = 86,585 (2006)
Commissioner of Internal Revenue
Douglas H. Shulman
parent_agency = Department of the Treasury
website = [http://www.irs.gov www.irs.gov]
footnotes =The Internal Revenue Service (IRS) is the United States federal government agency that collects
taxes and enforces the internal revenue laws. 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.
26 C.F.R. section 601.101(a).
Bureau of Internal Revenue
In July 1862, during the Civil War, President Lincoln and Congress created the office of
Commissioner of Internal Revenueand enacted an income taxto pay war expenses (see Revenue Act of 1862). The position of Commissioner exists today as the head of the Internal Revenue Service.
This organization was created to enforce these taxes 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
The IRS has its National Capital offices in the greater
Washington, D.C.area, and in particular does most of its computer programmingin 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; different types of tax processing take place in various centers (such as the distinction between individual and business tax processing). The IRS also operates three computercenters in various locations around the country.
Name change and reorganization
As early as the year 1918, the Bureau of Internal Revenue began using the name "Internal Revenue Service" on at least one tax form. [Form 1040, Individual Income Tax Return for year 1918, as republished in historical documents section of Publication 1796 (Rev. Feb. 2007), Internal Revenue Service, U.S. Department of the Treasury. Form 1040s for years 1918, 1919, and 1920 bore the name "Internal Revenue Service". For the 1921 tax year, the name was dropped, then was re-added for the 1929 tax year.] In 1953 the name change to the "Internal Revenue Service" was formalized in Treasury Decision 6038. [1953-2 C.B. 443 (Aug. 21, 1953), filed with Division of the Federal Register on Aug. 26, 1953. Compare Treas. Dep't Order 150-29 (July 9, 1953).]
In the 1950s, career professional
employees replaced the patronagesystem. Currently, only the IRS Commissioner and Chief Counsel are selected by the President and confirmed by the Senate.
Reorganization of the late 1990s
A bipartisan commission was created with several mandates, among them to increase customer service and improve collections. [http://www.house.gov/natcommirs/main.htm Official web site of the National Commission on Restructuring the Internal Revenue Service] Congress later enacted the "
Internal Revenue Service Restructuring and Reform Act of 1998". [Pub. L. No. 105-206, 112 Stat. 685 (July 22, 1998).] 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. While there is some evidence that customer service has improved, lost tax revenues in 2001 were over $290 billion. [http://www.treas.gov/press/releases/reports/otptaxgapstrategy%20final.pdf U.S. Department of the Treasury, Press Release, September 26, 2006]
Flooding at IRS headquarters building
The main headquarters building of the IRS is located at 1111
Constitution Avenue, NWin 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 Administrationannounced that the building would remain closed through late 2006. The employees who worked in the buildingndash numbering over two thousandndash had been temporarily transferred to other offices at 15 other buildings in the Washington, D.C. area. Computerworldreported that some IRS employees were also allowed to telecommute while the building was closed. [ [http://www.computerworld.com/action/article.do?command=viewArticleBasic&taxonomyName=it_in_government&articleId=9001560&taxonomyId=69 IRS flood spurs telecommuting] , Computerworld, "June 30, 2006"]
On December 8th, 2006, the IRS said in a press release that "the phased move-in of more than 2,000 IRS employees" had begun. [ [http://www.irs.gov/newsroom/article/0,,id=164869,00.html IRS Headquarters Reopens; First Employees Return Today] , Internal Revenue Service, "December 8, 2006"] Most staff would have returned by December 19th but "a small number of employees will return after Jan. 1."
Douglas H. Shulmanis the Commissioner of Internal Revenue.
Tax collection statistics
Summary of Collections before Refunds by Type of
Return, Fiscal Year 2006:
During Fiscal Year (FY) 2006, the IRS collected more than $2.2 trillion in tax net of refunds, about 44 percent of which was attributable to the individual income tax. This is partially due to the nature of the individual income tax category; containing taxes collected from working class, small business, self employed, and capital gains. Of the Individual Income Tax, the top 5% of income earners pay 60% of this amount. [ [http://www.irs.gov/taxstats/indtaxstats/article/0,,id=129270,00.html#_mti 'SOI Tax Stats - Individual Income Tax Rates and Tax Shares'] .
Yearly statistics, www.irs.org, Various dates.] [ [http://www.free-press-release.com/news/200710/1191980491.html 'New IRS Data Reveals That the Rich Really Do Pay Tax - Lots of It'] by John Gaver. Press Release, Actionamerica.org, 9 October, 2007.]
Recently, the IRS has altered its policies. The current "Service plus Enforcement equals Compliance" motto has led to more investigations of abusive tax schemes.
As of 2007, the agency estimates it is owed $300 billion more than it collects. [ [http://www.npr.org/templates/story/story.php?storyId=9031439 IRS Commissioner Assailed on 'Tax Gap'] by Jack Speer.
Morning Edition, National Public Radio, 21 March 2007.]
In September 2006, the IRS started 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 critics saying the new system "is a sound, balanced program that respects taxpayers' rights and taxpayer privacy." Other state and local agencies also use private collection agencies. [http://news.yahoo.com/s/ap/20060823/ap_on_go_ot/irs_debt_collection_2 D. Caterinicchia, IRS moves ahead on debt-collection plan]
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 Bulletincontaining 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 Proceduresthat 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 Treasuryshall provide, IRS undergoes the formal regulation process with a Notice of proposed rulemaking(NPRM) published in the Federal Registerannouncing 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 U.S. Supreme CourtJustice Antonin 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 [http://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/pdf/05-19379.pdf Proposed Regulations] (citation 70 F.R. 57930-57984) [ [http://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/05-19379.htm Federal Register (Volume 70, Number 191)] , "October 4, 2005"] for the Section 409A on deferred compensation (the so-called Enronrules on deferred compensation to add teeth to the old rules) because regulations have not been finalized.
Allegations of abuse
The IRS, and in particular the Criminal Investigation Division (CID), has on more than one occasion been accused of abusive behavior.cite web|url=http://enzi.senate.gov/anon1.htm|last= |first= |title=Prepared Statement Of Witness Before The Senate Finance Committee Oversight Hearing On The Internal Revenue Service|work= |publisher= |date= |accessdate=2007-06-17] [cite web|url=http://www.senate.gov/~finance/davis.htm|last=Davis|first=Robert Edwin|title=Statement before the Senate Committee on Finance|work= |publisher= |date= |accessdate=2007-06-17] [cite web|url=http://www.senate.gov/~enzi/schrieb.htm|last=Schriebman|first=Robert|title=Prepared Statement of Robert S. Schrieman Before the Senate Finance Committee|work= |publisher= |date= |accessdate=2007-06-17] [cite web|url=http://www.senate.gov/~enzi/davis.htm|last=Davis|first=Shelley L.|title=Prepared Statement of Shelley L. Davis Before the Senate Finance Committee Oversight Hearing On The Internal Revenue Service|work= |publisher= |date=1997-09-23|accessdate=2007-06-17] Statements given in hearings before the Senate Finance Committee criticize the IRS:
[D] oes the IRS correct abuses when they become aware of them? Oftentimes, they do. However, the more important question is, does the IRS cover up occurrences of abuse? The answer is, yes! If the true number of incidences of taxpayer abuse were ever known, the public would be appalled. If the public also ever knew the number of abuses "covered up" by the IRS, there could be a tax revolt.
Congress passed the
Taxpayer Bill of Rights IIIon July 22, 1998, which shifted the burden of proof from the taxpayer to the IRS in certain limited situations. The IRS retains the legal authority to enforce liens and seize assets without obtaining judgment in court. [See usc|26|6331. For case law on section 6331, see "Brian v. Gugin", 853 F. Supp. 358, 94-1 U.S. Tax Cas. (CCH) paragr. 50,278 (D. Idaho 1994), "aff’d", 95-1 U.S. Tax Cas. (CCH) paragr. 50,067 (9th Cir. 1995).]
Allegations of insidious conduct by the IRS are found in the movie ( [http://video.google.com/videoplay?docid=5355374476580235299 Watch Movie] ), directed by
Libertarianfilmmaker Aaron Russo. The movie alleges that the IRS is part of a plot to make the United States a police state. See also Tax protester conspiracy arguments.
Attorney Michael Minns has asserted that the IRS often destroys the lives of those it targets with no regard for their personal lives or reputations, or that of their families.Fact|date=February 2008 Minns was the defense lawyer in a case against the IRS on behalf of James and Pamela Moran after an initial indictment and what Minns asserts was an IRS smear campaign that virtually canvassed the taxpayers' own hometown and surrounding area. [Katharhynn Heidelberg, " Attorney: IRS should apologize," "Montrose Daily Press" (Montrose, Colorado), Dec. 28, 2007, at [http://www.montrosepress.com/articles/2007/12/29/news/doc4775c5d33b9e9073750758.txt] .] The original indictment was associated with the Morans' involvement with a tax shelter provider, Anderson's Ark & Associates. The Morans were eventually acquitted in the case. [Katharhynn Heidelberg, "Morans Acquitted on All Counts," "Montrose Daily Press" (Montrose, Colorado), Dec. 21, 2007, at [http://www.montrosepress.com/articles/2007/12/22/news/doc476c93bd9246d741646059.txt] .]
Minns also had previously asserted that the behavior of two IRS attorneys, Kenneth McWade and William A. Sims, constituted legal misconduct and recommended them for disbarment. Following an investigation, the law licenses of the IRS attorneys were duly suspended for a two year period after a federal court ruling found that the two had indeed defrauded the courts in connection with 1,300 tax shelter cases. In 2003, the United States Court of Appeals for the Ninth Circuit concluded that the IRS lawyers had corruptly agreed with certain taxpayers that no tax collection actions would be taken against them - in return for testimony against other taxpayers. The court also asked why the IRS had not punished the two. [
David Cay Johnston, Aug. 21, 2004, "2 Ex-IRS Lawyers' Licenses Suspended for Misconduct," " New York Times", at [http://www.nytimes.com/2004/08/21/business/21tax.html] .]
Legal status and authority
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, [Lawsuits against the U.S. government in the
United States Tax Courtare generally filed against the "Commissioner of Internal Revenue," not the "Internal Revenue Service". Lawsuits in other federal courts are generally filed against "The United States of America."] the IRS is not a federal government agency. Some claim it is a Puerto Rican trust. [cite web|url=http://www.supremelaw.org/sls/31answers.htm|last=Mitchell|first=Paul|title=31 Questions and Answers about the Internal Revenue Service|work= |publisher=Supreme Law Library|date= |accessdate=2006-08-16] The courts have uniformly rejected such arguments as a basis for not filing a tax return or paying tax.
Tax lawyers at the IRS
Most tax lawyers employed at the IRS are part of the Office of Chief Counsel, either in the home office in Washington, D.C., or in the field. Rulemaking occurs in the home office in various divisions such as Passthroughs and Special Industries, Financial Institutions, Large and Mid Size Business, Tax Exempt and others. Litigators can be found in the field where the Service finds taxpayers who have been given notice of deficiencies.
Taxation in the United States
Federal tax revenue by state
United States of America non-profit laws
Misclassification of employees as independent contractors
United States Department of Justice Tax Division
* Secretaría de Hacienda y Crédito Público
* cite book
title=Unbridled Power: Inside the Secret Culture of the IRS
* cite book
authorlink=David Cay Johnston
Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich - and Cheat Everybody Else
* cite book
title=Many Unhappy Returns: One Man's Quest To Turn Around The Most Unpopular Organization In America
publisher=Harvard Business School Press
* cite book
first=William V., Jr.
coauthors=Nixon, William H.
title=The Power to Destroy
publisher=Atlantic Monthly Press
* [http://www.irs.gov/ Internal Revenue Service] Official website
* [http://www.jobs.irs.gov/ Internal Revenue Service Careers Web] Official IRS careers website
* [http://www.irs.gov/individuals/content/0,,id=98196,00.html IRS Appeals - Resolving Tax Disputes] Official IRS Appeals Office Website
* [http://evans-legal.com/dan/tpfaq.html Tax Protester FAQ] by Dan Evans rebuts claims of the illegitimacy of the income tax and the IRS
* [http://www.federalgovernmentsales.com/irs.html IRS Property Auctions] How to buy from the IRS
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