Takeaways
- IRS is a federal agency responsible for collecting taxes and tax law enforcement.
- The deadline to file and pay your individual income taxes is April 15, 2024.
- Taxpayers can pay taxes through various online payment methods offered by the IRS.
- IRS oversees various taxes, including payroll, corporate, and individual income taxes.
- The IRS collects taxes, ensures tax law compliance, processes tax returns, and issues refunds.
What is the IRS?
The Internal Revenue Service, better known as the IRS, is the federal agency tasked with the administration and enforcement of all tax laws in the U.S. It is a bureau of the Department of the Treasury, and it has a vital part in the receipt of revenues for the government. The IRS collects taxes, such as payroll, corporations, individual income, and more. It is also in charge of overseeing various programs related to taxes.
The IRS ensures individuals and businesses follow the tax code and guides taxpayers who need help fulfilling their tax obligations. The duties of the IRS also extend beyond simply tax collection. They process tax returns, issue refunds on overpaid taxes, and maintain general tax records.
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Additionally, the IRS implements tax policy changes enacted by Congress, which makes it a key player in the economic framework of the entire nation. Through its comprehensive website, a network of call centers, and local offices in every region of the country, the IRS provides crucial resources, helps taxpayers, and facilitates the annual tax filing process.
History of the IRS
The IRS has a rich history that stretches back to the Civil War. It was established in 1862 by President Lincoln and Congress, with an initial purpose to collect “revenue to support the Government and to pay interest on the public debt.” The tax system has expanded over the years, including the 16th amendment, which authorizes income tax, leading to the permanent establishment of the income tax system [2].
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How the IRS Works
The IRS operates in a structured framework to better facilitate and manage tax collection and enforcement. The agency consists of multiple divisions, each specializing in specific aspects of tax administration. These elements include individual taxes, business taxes for large and international businesses, and tax-exempt entities.
The IRS uses a variety of methods to ensure compliance with tax laws. These methods include manual review of tax forms, providing taxpayer services, and conducting audits. The IRS uses incredibly sophisticated computer systems to analyze filings and potentially identify discrepancies or non-compliance with applicable laws. When issues are detected or identified, the IRS can contact you to clarify or resolve a tax concern.
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The agency also leverages state-of-the-art technology to streamline annual tax filing, processing, and payment. This includes popular features like electronic filing options, direct depositing refunds, and online payment agreements. The overall operations and general policies of the IRS are built off tax laws passed by Congress to enact fair and efficient tax administration for all taxpayers.
Tax Filing and Collection
Tax filing and collection are two of the most crucial functions of the IRS and are central to the IRS’s general role in the national tax system. Every year in April, individuals, businesses, and other entities file tax returns. These returns report their income, expenses, and other relevant information to the IRS. The filing process will determine the amount of tax owed to the government by the individual or business or refund due to the taxpayer.
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The IRS collects various types of taxes, including income taxes, payroll taxes for Social Security and Medicare, corporate taxes, and even taxes from gifts and inherited estates [1]. Income taxes are progressive, which means the rate generally increases as the taxpayer’s income grows. These taxes are deducted from wages or reported on yearly returns. Payroll taxes are usually split between employee and employer and are collected throughout the year.
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You can pay taxes in many ways, including electronic funds transfers, credit and debit cards, checks, and even money orders. If you cannot pay your entire tax bill in one lump sum, the IRS offers payment agreements that break down the tax obligation into monthly installments.
Tax collection is enforced through penalties for late payments and interest on unpaid taxes. The IRS also has legal authority to pursue action against you if you are non-compliant. Legal action is how the IRS upholds the integrity of the tax system.
How to Pay Your Taxes
One of the most common questions is how to pay your taxes. If you owe taxes, paying taxes is a simple process that can be done in several different ways. There are multiple options available to cater to your preferences and economic situations.
The IRS prefers electronic payments due to their speed, security, and simplicity. Because of that, the IRS offers several online payment methods:
- Direct Pay: Direct Pay allows you to pay directly from your checking account or savings account (for free). Direct pay can be ideal for paying income tax, estimated tax payments, and other taxes.
- Electronic Federal Tax Payment System (EFTPS): EFTPS is a system for paying taxes electronically, either online or via phone. Individuals and businesses can pay taxes through the EFTPS.
- Credit or Debit Cards: You can also make tax payments through third-party payment service providers like your credit card or debit card. These options are convenient, but they also typically come with a fee.
You don't have to pay electronically. If you prefer to pay through more traditional methods, checks or money orders - made payable to the United States Treasury - can be mailed along with your tax payment voucher. Your tax payment voucher is also known as the 1040-V Payment Voucher.
Depending on the size of your tax bill, you might not be able to pay in one lump sum. If you fall into this camp, the IRS offers payment plans. These include short-term extensions and long-term installment agreements. These options are meant to help individuals and businesses better manage their tax liability over time.
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How to Contact the IRS
If you need tax help or have specific questions, there are several ways to contact the IRS directly.
- Phone: Phone representatives answer questions about taxes, filing, or other issues. They will verify your identity before continuing with any discussion of personal information. IRS phone contacts include:
- Individuals - 800-829-1040
- Businesses - 800-829-4933
- Non-Profit Taxes - 877-829-5500
- Estate and gift taxes - 866-699-4083
- Excise taxes - 866-699-4096
- TTY/TDD - 800-829-4059
- Online: The official IRS website has vast online resources to obtain information.
- In-Person: You can find your local office with the Taxpayer Assistance Locater.
- Mail: To determine the proper location for mailing, consult your tax return or speak to someone at the IRS.
How Does the IRS Conduct Audits?
The IRS periodically and randomly conducts audits to verify the accuracy of your return and ensure compliance with all pertinent tax laws. Audits can be selected based on several factors, including random sampling, determination by computerized analysis, or document matching that yields a discrepancy.
Correspondence audits are the most common audit and are usually done via mail. The IRS requests documentation from the taxpayer to verify certain items or claims on the tax return.
Office audits will require the taxpayer to bring specific documents to an in-person IRS office to verify, clarify, or dispute details of the return. Field audits are the most comprehensive and are when an IRS agent visits your home, business, or accountant’s practice to examine the specific records and documents needed.
Best Way to File Taxes
As mentioned, the IRS has a particular fondness for electronic methods, which extends to filing as well. The IRS-recommended filing method is e-filing. This is due to the speed, accuracy, and rapid confirmation that it provides to taxpayers.
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Smart Summary
Paying taxes is part of earning and income. If you have recently received a promotion or raise, you might owe more taxes this year than last. Through property financial planning and tax strategies, you shouldn’t be caught off guard by owing the IRS a large tax payment. Consult an accountant or tax professional for more specific advice about your financial situation.
(1) Internal Revenue Service. Social Security and Medicare Withholding Rates. Last Accessed March 15, 2024.
(2) IRS.gov. Brief History of the IRS. Last Accessed March 15, 2024.
