What Is the IRS, and What Do They Do?

Nov 19, 2023 By Triston Martin

The IRS, based in the nation's capital, is in charge of taxation for all individuals and businesses in the United States, no matter how large or small. It processed over 240 million income tax returns and other forms for the fiscal year 2020 (October 1, 2019, through September 30, 2020). The COVID-19 outbreak resulted in $268 billion in economic impact payments and $736 billion in tax refunds issued by the IRS during that period.

Individuals and businesses in the United States can now electronically file their tax returns because of advances in computer technology, software, and reliable internet connections. Most people now file their tax returns electronically, largely thanks to the IRS's implementation of the programme. In the fiscal year 2020, nearly all individual tax returns were filed electronically.

It was used by roughly 40 million of the 131 million tax returns filed in 2001. A total of 112 million taxpayers have switched from paper checks to direct deposits by October 2021, with an average direct deposit amount of $2,851 per. The IRS recommends no platform or tax software, even though it encourages people to file their forms electronically.

The Internal Revenue Service and audits

A random sample of tax returns is audited each year by the Internal Revenue Service as part of its responsibility to ensure compliance. Fiscal 2020 saw the IRS conduct an audit of 509,917 tax returns. One per cent of corporate and 0.63 per cent of individual tax returns are affected. On-site audits accounted for 27.3 per cent of all IRS audits, while mail audits accounted for 72.6% of all audits.

Since 2010, the number of audits has been steadily decreasing. Instead of a 30% decline, there has been a 70% decrease in the amount of money set aside for tax enforcement since 2010. The reasons for an IRS audit can vary greatly, but a few factors can increase the risk of one. The most critical of these is a pay increase.

Audits of individual tax returns will amount to 0.63 per cent in 2020. In contrast, it was 9.8% for individuals making over $10 million. Running your own business is also more dangerous. Those making between $200,000 and $1 million in 2018 must submit Schedule C (the self-employment tax form), and those who fail to do so run a 1.4% risk of being audited.

Any of the following: failure to report the correct amount of income, excessive deductions (especially those tied to a business), substantial donations to charity, or assertions of rental property losses may also trigger an audit.

Ways to Get In Touch With the IRS

There are many ways to get in touch with the IRS. If you're submitting your taxes by mail, your state of residency and whether or not you expect a refund will influence the address you select. You may be able to discover a list on the IRS website. The IRS website provides a list of postal addresses based on whether you're applying or making a payment.

By phone or email, you can get in touch with me at any time.

Call (800) 829-1040 on weekdays between the hours of seven am and seven pm Eastern time for assistance, and there are other toll-free lines accessible for businesses and various other purposes. On the other side, contacting a natural person may take some time and effort. There is a lengthy sequence of automatic questions that you must answer on CPA Amy Northard's site, which she has outlined in detail.

You can get answers to various tax-related questions using the IRS's Interactive Tax Assistant online. In real life, The IRS can also be contacted by phone to set up an in-person meeting at your local branch office. To find the nearest IRS office, enter your ZIP code into the IRS website's locator page.

Residency for Tax Purposes

The IRS accepts your bank account and credit and debit card payments. E-filing your tax return can also be done by a bank wire or a withdrawal of electronic funds on the same day. If you're a business or making a large payment, you must enrol in the Electronic Federal Tax Payment System before utilising it.

It is possible to pay via non-electronic means. Personal checks, money orders, and cashier's checks are all options for payment. The following information should be written on the "U.S. Treasury" check.

How old is the Internal Revenue Service?

As president at the time, Abraham Lincoln established the Internal Revenue Service (IRS) in 1862 as part of his efforts to raise funds for the American Civil War. Following its abolition in 1872, the tax was reinstituted in 1894 before being declared unconstitutional by the U.S. Supreme Court in 1895. Since the 16th Amendment to the United States Constitution was adopted in 1913, federal income taxes have been collected again.

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