You have probably heard a lot about the IRS and its role in tax collection in America, but how much do you really know about the federal bureau that has a major impact on the work of accounting professionals across the country? In the United States, the Internal Revenue Service (IRS) is the federal government agency that oversees compliance with the Internal Revenue Code, or the federal tax code. The IRS handles the collection of an array of different taxes, from corporate to personal income tax to estate, gift, employment and excise taxes. Each year, the IRS processes hundreds of millions of tax returns of various kinds.
The Organizational Structure of the IRS
Officially, the IRS is a bureau of the Department of the Treasury. The Commissioner of Internal Revenue spearheads the bureau. The Commissioner of Internal Revenue positions predates the bureau itself, dating back to 1862, when President Lincoln and Congress established an income tax to fund the Civil War. When what we know today as the IRS was established, it was then called the Bureau of Internal Revenue. It was not until the 1950s that the bureau changed its name to the Internal Revenue Service, according to the IRS. In 1998, when Congress passed the IRS Restructuring and Reform Act, the bureau became the modern organization we know today, one designed to mimic private sector models to meet “customer” – or in this case, taxpayer – needs.
The Internal Revenue Service’s Responsibilities
The IRS has a number of responsibilities, but all of those responsibilities primarily center on collecting tax dollars. The bureau publishes a wide variety of tax forms, both for use by taxpayers and for internal processing operations. The IRS is also responsible for preventing tax fraud and evasion by searching out taxpayers who attempt to “cheat” the system through dishonest filing or deductions. To do this, they audit – or examine more closely for accuracy – tax returns that differ from the “norm,” or the typical tax returns.
At all times, IRS personnel must follow the proper procedures, as described in the Internal Revenue Manual, for processing and auditing tax returns. The IRS notifies accounting professionals and taxpayers of regulation changes and the bureau’s stance on various tax matters through the publication of the Internal Revenue Bulletin as well as issuing formal Revenue Procedures and administrative rulings. The IRS must also work to prevent tax-related identity theft, which is why it now employs thousands of professionals dedicated exclusively to protecting taxpayer identities.
Whether you work in private or public accounting, the actions of the IRS will impact your work. The IRS employs close to 95,000 people, many of whom are accounting and auditing professionals, so some aspiring accountants view the bureau as a potential employer. Even accountants who work in the private sector or at other levels of the government are affected by the IRS, because they must know and comply with all regulations when handling any sort of tax return for their clients.