Legal Definitions - Internal Revenue Service (IRS)

Internal Revenue Service (IRS)

The Internal Revenue Service (IRS) is the primary agency of the United States federal government responsible for collecting taxes and enforcing the nation's tax laws. Operating as a bureau within the Department of the Treasury, the IRS ensures that individuals and businesses comply with the Internal Revenue Code, which outlines all federal tax regulations.

• Example 1: Sarah, a freelance graphic designer, diligently prepares her annual income tax return, calculating her earnings and deductions. She then electronically submits her completed Form 1040 to the IRS, along with any payment due. This interaction demonstrates the IRS's fundamental role in collecting federal income taxes from individual citizens and residents.

• Example 2: A small business owner, Mr. Chen, hires his first employee and needs to obtain an Employer Identification Number (EIN) to properly report payroll taxes. He applies for the EIN through the IRS website and subsequently remits federal income tax withholding, Social Security, and Medicare taxes to the IRS on behalf of his employees. This illustrates the IRS's function in overseeing business tax compliance, including employer responsibilities for payroll taxes.

• Example 3: After reviewing a discrepancy in reported income, the IRS sends a notice to a taxpayer requesting additional documentation to verify certain deductions claimed on their tax return. This audit process is part of the IRS's enforcement efforts to ensure the accuracy and honesty of tax filings, demonstrating its authority to investigate and ensure compliance with federal tax laws.