But broad political pressure for a more muscular federal government led to the ratification of the constitution's Sixteenth Amendment on February 13, "The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.
The third leg came in the middle of World War II when Congress approved a law requiring employees to withhold from salaries and wages the taxes owed by their employees. Following the war, the IRS was engulfed in a massive corruption scandal that touched almost every level of the agency. After extensive Congressional hearings, the IRS underwent a basic re-organization while at the same time, installing what was then considered one of the most advanced computerized management systems in the world.
In the mids, the overall performance of the IRS -- particularly the way it dealt with individual taxpayers -- again became the subject of widespread public concern. For many decades, the agency had been divided into scores of different districts along geographical lines. Most taxpayers -- individual, business, farm, corporation and tax exempt -- were processed by the districts where they were located.
The law called for the elimination of this basic geographical system and its replacement by four functional units. In theory, one unit would deal with wage and investment returns filed by individual taxpayers, a second with the returns of small businesses and the self-employed, a third with those of large and mid-sized businesses and the fourth with tax exempt organizations.
In May of , the Senate confirmed the nomination of Mark W. Select personalised ads. Apply market research to generate audience insights.
Measure content performance. Develop and improve products. List of Partners vendors. Established in by President Abraham Lincoln, the agency operates under the authority of the United States Department of the Treasury , and its primary purpose includes the collection of individual income taxes and employment taxes. The IRS also handles corporate, gift, excise, and estate taxes , including mutual funds and dividends.
Headquartered in Washington, D. For the fiscal year Oct. Individuals and corporations have the option to file income returns electronically, thanks to computer technology, software programs, and secure internet connections. The number of income taxes that use e-file has grown steadily since the IRS began the program, and now the overwhelming majority are filed this way.
During fiscal year , nearly As of Nov. Although the Internal Revenue Service IRS recommends filing tax returns electronically, it does not endorse any particular platform or filing software. As part of its enforcement mission, the IRS audits a select portion of income tax returns every year. For the fiscal year, the agency audited , tax returns. This number breaks down to 0. Around After rising to a peak in , the number of audits has steadily dropped each year. Reasons for an IRS audit vary, but some factors may increase the odds of an examination.
Chief among them: higher income. And running your own business carries greater risks too. Other red flags for an audit include failing to declare the right amount of income, claiming a higher-than-normal amount of deductions especially business-related ones , making disproportionately large charitable donations compared to income, and claiming rental real estate losses.
No single factor determines who does or does not face an IRS audit each year. The tax code has been amended 4, times in the past 12 years alone and now runs to 74, pages. Such "complexity creep" only confirms "taxpayers' suspicions that the tax laws are designed to entrap them and obscure what is and is not being taxed," wrote National Taxpayer Advocate Nina E. Olson in her last annual report.
Refusing to pay taxes "I like to pay taxes. But ever since federal income taxes were first levied, many Americans have disliked taxes so strongly that they've refused to pay them. Wichita contractor Arthur Porth unsuccessfully argued in a case that taxation amounts to "involuntary servitude," making it illegal under the 13th Amendment.
More recently, a Pennsylvania small-business owner named Larken Rose concocted the so-called argument, named after the section of the code that lays out the sources of taxable income. In Rose's arcane reading of that section, which he turned into a video that sold more than 15, copies, only income derived from "international commerce or federal possessions'' is taxable. Courts have repeatedly rejected this reading of the code, and Rose has served 15 months in jail for tax evasion. Unmoved, a judge sentenced him to three years in prison.
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