Collecting and processing tax returns that individuals and businesses file.Making sure you pay any taxes that are due.Issuing refunds if you overpaid taxes during the year.Overseeing certain retirement plans.Conducting criminal investigations.Guiding you through your tax payment process and any tax issues you may have.
What Does the IRS Do?
In 2021, the IRS dedicated 36.7% of of its total budget to enforcement, and 37.3% of its total budget to operations support. Enforcement activities include determining and collecting owed taxes, providing legal support, and conducting criminal investigations. But IRS involvement in the lives of Americans doesn’t begin and end with collecting taxes. The agency is also in charge of managing various tax credits and subsidies for low- and middle-income families, like the Earned Income Tax Credit, subsidies under the Affordable Care Act, and education tax credits that might have helped put you or your children through college.
Who Owns the IRS?
The IRS is a bureau of the U.S. Department of Treasury and considers itself a “tax administrator” that works under the direction of the Secretary of the Treasury. So rather than be “owned” by the Treasury, the IRS “works for” the Treasury. The IRS has repeatedly argued that, even though Congress did not create the IRS through an act, it is a government agency. It cites the 1971 Supreme Court case Donaldson v. the United States, in which the court ruled the IRS is allowed to administer internal revenue laws as an agency would. Also, the IRS points out that the U.S. Code grants the Secretary of the Treasury full authority to enforce tax law and to appoint an agency to do so.
IRS Leadership
The President appoints the IRS Commissioner, who is the chief executive of the IRS. The Senate must approve the appointee. Commissioners serve five-year terms and are responsible for overseeing all operations of the IRS, from processing tax returns and enforcing tax laws to the collection of taxes.
When Did Federal Income Tax Start?
Income tax has its origin in the Civil War. President Abraham Lincoln signed income tax into law and created the “Commissioner of Internal Revenue” in 1862 to raise revenue for the war effort. That first income tax was 3% on incomes from $600 to $10,000, and 5% on incomes over $10,000. That tax didn’t last long, however. It was repealed 10 years later, in 1872. Congress brought the income tax back 22 years later via the Wilson Tariff Act of 1894, but that wasn’t permanent. The Supreme Court ruled one year later that the tax was unconstitutional. Then, the 16th Amendment was ratified in 1913 when three-quarters of Americans formed a majority to amend the Constitution to allow the government to impose an income tax. The first Form 1040 tax return came into being a year later. The first personal income tax was 1% for incomes above $3,000 and 6% for incomes of more than $500,000. Then came World War I and another war effort. Congress hiked the top tax rate to 77%, where it remained for 11 years. The rate dropped to 24% by 1929, only to increase again in response to the Great Depression.
Significance of the IRS Logo
The IRS logo features three images in one:
Eagle: Represents the United States (the national bird is the bald eagle)Olive branch: Represents peaceScales: Represents justice and fairness
The IRS intends the symbol to express “justice, fairness, honesty, peace, and conciliation.” To check the status of your refund, you can call 800-829-1954. You can also schedule a face-to-face meeting with an agent at your local IRS office.
