What Is the Internal Revenue Service (IRS)?

The Internal Revenue Service (IRS) is a government agency that administers tax laws and collects federal taxes from U.S. individual and corporate taxpayers. The IRS is a division of the U.S. Treasury Department and ensures that the responsibilities of the Treasury secretary are followed through under the Internal Revenue Code (IRC). Established in 1862, the agency also handles gift, excise, and estate taxes. The IRS routinely conducts audits to ensure that taxpayers comply with tax laws.

How the Internal Revenue Service (IRS) Works

The IRS traces its roots back to 1862 when President Abraham Lincoln created the commissioner of Internal Revenue to collect taxes to fund the war. In 1913, Congress was given the power to enact income tax laws, paving the way for the Bureau of Internal Revenue. The agency, whose name was changed to the Internal Revenue Service in the 1950s, went through a series of changes and reorganization to what it is today

Internal Revenue Service (IRS) Audits

The IRS audits a select portion of income tax returns every year as part of its enforcement mission. Audits ensure that taxpayers are accurate information to the IRS according to tax laws. The agency randomly selects taxpayers to audit or singles out those whose returns are related to others that were audited. In other cases, there may be red flags that alert the IRS to conduct an audit. 13 The audit process involves an auditor who reviews the return. This individual may either accept the return or request a review. In the latter case, the taxpayer is notified by mail. The audit involves reviewing paperwork and may be conducted by mail or in person at an IRS office or another location, such as the taxpayer's home, business, or accountant's office