Understanding the IRS
Generally we only think about the IRS during Tax Season, but they work hard year round. Here’s more information about the Internal Revenue Service so you can better understand what they do and why.
The IRS was created in 1862 during the Civil War. President Abraham Lincoln, along with Congress, formed the office of Commissioner of Internal Revenue. At the time, the commissioner was charged with collecting a temporary income tax that was enacted to help pay for the increasing war expenses. This was the first time income was taxed in the United States.
In 1894, the Supreme Court heard the case of Pollock v. Farmers’ Loan & Trust Co. and declared that the Income Tax of 1894 was unconstitutional because it didn’t apportion taxes, effectively making income tax function more like a direct tax. However, in 1913, the 16th Amendment was enacted as a sort of work around, exempting income tax from certain rules and making it a more permanent part of our lives.
Since then, we’ve seen taxes become a political football. Politicians have argued for a flat income tax, as well as a more progressive system that taxed the rich more heavily. Some candidates base large chunks of their campaigns on their tax stances (everyone read Bush Sr.’s lips: No New Taxes).
The IRS is charged with collecting taxes from US citizens and those whose primary income is from a US source. It is their responsibility to publish the tax forms we see every January. The IRS also has the distinct responsibility of pursuing those individuals and organizations that don’t pay their taxes or file fraudulent returns. This role of the Internal Revenue Service is part of what makes it an intimidating organization. Not only do they provide us with confusing literature regarding how to fill out what can feel like endless forms, but they are also responsible for sifting through the paperwork and identifying errors and fraud.
What This Means For You
If you find you require legal help due to missed tax returns, issues with offshore holdings, or a large tax bill, it is important that you seek advice from a tax relief law firm immediately. As previously stated, the IRS loves a good deadline.