The Internal Revenue Service (IRS) is a part of the U.S. government. It’s responsible for collecting taxes and administering tax laws.
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Importance of the Internal Revenue Service (IRS)
The IRS was established in 1862 under the Department of the Treasury by President Abraham Lincoln. George S. Boutwell served as the first commissioner.
It’s an important part of the U.S. government because the IRS collects revenue, enforces laws, issues refunds, does internal audits, security activities, issues federal identification numbers, and provides assistance and education to taxpayers.
They also oversee tax-exempt organizations and qualified retirement plans.
Whether you’re employed, self-employed, unemployed, or retired, you must follow the tax laws.
It’s also important to understand that the IRS doesn’t pass laws, congress does. The IRS enforces and oversees them.
Tax-relation fraud and identity theft can occur. It’s a big deal because someone can steal your social security number and file a fraudulent return or claim a refund or credit.
One of the best ways that the IRS offers to protect your identity is with an Identity Protection PIN.
It’s a voluntary program where you can get a six-digit code that’s only known by you and the IRS. For security, you’ll also get a new PIN every year.
To get one, you must create an account and go through a rigorous identity verification process online.
While there are hundreds of forms and schedules, the following are the most common:
- Form 1040. An annual income tax return filed by citizens and residents of the U.S.
- Form 1040-ES. Helps people with income that’s not subject to tax withholding figure out how much to pay for estimated tax.
- Form W-2. Shows wage and tax information for an employee.
- Form W-4. Helps your employer withhold the correct federal income tax from your pay.
- Form W-9. Used to request a taxpayer identification number (TIN) for reporting.
- Form 4506-T. Allows you to order a transcript or other return information or designate a third party to receive the information without a charge.
- Form 941. Employers file it as a quarterly federal tax return.
- Form SS-4. Application for an employer identification number (EIN).
- Form W-7. Application for a taxpayer identification number (TIN).
Audits are one of the important functions of the IRS. The purpose is to review an individual’s or organization’s accounts and financial information to ensure information is being reported correctly.
The following are several reasons that you or your business may be selected for an audit:
- Random selection.
- Your tax returns are different from the norm for similar returns.
- You come up when there are issues or transactions with others that are being audited.
The IRS conducts audits by mail or an in-person interview. If you’re selected, you’ll receive a notice in the mail, which will also include the specific documents that the IRS would like to review.
Generally, the IRS will review three to six years of tax returns. If they find big errors, they may add more years to the audit.
An audit can end one of three ways. There can be no change, which means everything looks good. The second is an agreement where the IRS proposed changes, which you understand and agree to.
The third is a disagreement, which means the IRS proposed changes that you understand but disagree with. If this is the case, you can request a conference with an IRS manager or file an appeal.
How to contact
It may seem intimidating to contact the IRS. However, there are several ways to get your questions and concerns taken care of.
You can speak to a representative from the IRS over the phone or in-person at a local office.
The helplines are open Monday through Friday. The following are the phone numbers based on different situations:
- Individuals: 800-829-1040. Open 7 AM to 7 PM local time.
- Businesses: 800-829-4933. Open 7 AM to 7 PM local time.
- Non-profit taxes: 877-829-5500. Open 8 AM to 5 PM local time.
- Estate and gift taxes: 866-699-4083. Open 8 AM to 3:30 PM EST.
- Excise taxes: 866-699-4096. Open 8 AM to 6 PM EST.
Average wait times can range from 15 to 30 minutes. Monday and Tuesday are the busiest days. Keep that in mind when you’re planning to call the IRS.
To visit your local Taxpayer Assistance Center, find the office and schedule an appointment.
The IRS does more than collect taxes and issue refunds. It’s an important part of the U.S. government and ensures that everyone is complying with tax laws. Education and assistance are some of the most underutilized aspects that every taxpayer should take advantage of.
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About David Em
David Em is the founder of More Money More Choices, which he launched to help you take control of your finances and build your dream life. Before More Money More Choices, David worked in leadership positions in the finance industry.