Internal Revenue Service is the agency of the United States Department of the Treasury that collects income taxes. The agency also enforces tax laws, offers advice to taxpayers, and collects estate, excise, gift, and other taxes. The money that the agency collects is called internal revenue because it comes from sources within the country. Tax money pays for most of the activities of the U.S. government, including national defense.
The Internal Revenue Service, often called simply the IRS, administers a tax system based on voluntary cooperation. The taxpayer fills out a form, called a tax return, stating income and the amount of tax owed. Some people file their returns with the IRS by computer or phone. The majority of people have already paid most of what they owe through the pay-as-you-go plan. Under this system, employers collect a withholding tax from each paycheck and send the tax directly to the IRS. If a taxpayer owes still more tax, the additional money must be sent to the IRS by April 15. If too much tax has been paid, the agency issues a refund.
The IRS handles millions of tax returns annually. Computers check the returns for mistakes in arithmetic and other errors. On some returns, the IRS performs a detailed examination called an audit. An IRS agent may ask the taxpayer to furnish proof of the deductions and exemptions claimed on the tax return (see Income tax ). The agent then may decide that the person owes additional taxes. If the taxpayer disagrees, an appeal can be made to various IRS officials. If an agreement is not reached, the taxpayer can then appeal to the United States Tax Court or to other federal courts, depending on the nature of the case. The headquarters of the Internal Revenue Service are in Washington, D.C.
The government established the Office of Internal Revenue in 1862 to help pay the cost of the American Civil War (1861-1865). The federal income tax system began in 1913, and the pay-as-you-go plan went into effect in 1943. In 1998, Congress passed legislation designed to help protect the rights of taxpayers. The law created an independent nine-member board to oversee IRS activities. The board consists of the treasury secretary, the commissioner of the IRS, and seven people appointed by the president.
