"It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles;
If you do not know your enemies but do know yourself, you will win one and lose one;
If you do not know your enemies nor yourself, you will be imperiled in every single battle."
- Sun Tzu, The Art of War
The IRS is a bureau of the Department of the Treasury. In fiscal year 2012, the IRS collected more than $2.5 trillion in revenue and processed more than 237 million tax returns. According to its website, it is the Mission Statement of the IRS to “Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.”
The United States government gets its authority to tax from Article I, Section 8 of the Constitution. In the United States, the Congress utilizes this authority to pass tax laws and requires taxpayers to comply. The taxpayer’s role is to understand and meet his or her tax obligations. The IRS role is to help the large majority of compliant taxpayers with the tax law, while ensuring that the minority who are unwilling to comply pay their fair share, are held accountable.
History & Statutory Authority
The IRS is organized to carry out the responsibilities of the Secretary of the Treasury under section 7801 of the Internal Revenue Code. The Secretary has full authority to administer and enforce the internal revenue laws and has the power to create an agency to enforce these laws. The IRS was created based on this legislative grant.
Section 7803 of the Internal Revenue Code provides for the appointment of a commissioner of Internal Revenue to administer and supervise the execution and application of the internal revenue laws. John Koskinen is currently the 48th Commissioner of the Internal Revenue Service. There have been 47 previous commissioners of Internal Revenue and 26 acting commissioners since the agency was created in 1862. (See the basic structure of today's IRS in this picture of the IRS Organization Chart.)
The roots of IRS go back to the Civil War when President Lincoln and Congress, in 1862, created the position of Commissioner of Internal Revenue and enacted an income tax to pay war expenses. This income tax was repealed 10 years later, but in 1913, Wyoming ratified the 16th Amendment, providing the three-quarter majority of states necessary to amend the Constitution. The 16th Amendment gave Congress the authority to enact an income tax.
That same year, the first Form 1040 appeared after Congress levied a 1 percent tax on net personal incomes above $3,000 with a 6 percent surtax on incomes of more than $500,000.
In 1918, during World War I, the top rate of the income tax rose to 77 percent to help finance the war effort. It dropped sharply in the post-war years, down to 24 percent in 1929, and rose again during the Depression. During World War II, Congress introduced payroll withholding and quarterly tax payments. (See link for 1913 Form 1040 (PDF 126KB, 4 pages, including instructions).
How Do I Know if the IRS is Auditing Me?
For many Americans, the thought of an IRS audit elicits feelings of fear and panic. Often times the fear of the unknown can be worse (or nearly as bad) as the audit itself. Therefore, one of the first steps to alleviate this fear is to simply answer the question of whether or not you are actually facing an IRS audit. See a more comprehensive discussion on how to know if the IRS is looking at you at <Know Your Enemy _1.2_ 10 "Red Flags" that Can Trigger an IRS Audit>.
If you have received any one or more of the following, you will want to contact a tax professional:
- IRS Audit Letters
- Notice of Audit and Examination Schedule
- General 30 Day Audit Notice
- Notice of Deficiency: The 90-day Letter
- Request for Consideration of Additional Findings
When Does A Tax Attorney Become Necessary?
In an audit, the IRS is essentially a prosecuting attorney and you are the defendant. It can be very difficult for anyone who is not experienced in dealing with IRS audits to ascertain whether or not a question or piece of information could potentially be damaging to your case or trigger an expansion of the IRS audit.
Therefore, it is recommended that you seek the counsel of a qualified tax attorney if you are being audited by the IRS. The Tax Lawyer - William D. Hartsock offers a free phone consultation with the benefit of attorney client privilege. If your case is very simple and straightforward, no further legal assistance may be needed. However, if your case could potentially lead to larger problems, you may be able to avoid making early mistakes. For your free consultation contact The Tax Attorney - William D. Hartsock, Tax Attorney Inc. at 858-481-4844.