IRS FRAUDS AND SCAMS AND HOW TO AVOID THEM

The Internal Revenue Service (IRS) is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue. The IRS is responsible for collecting taxes and the interpretation and enforcement of the Internal Revenue Code.

Contents 1 Summary 1.1 American Civil War (1861–65) 1.2 Post Civil War, Reconstruction, and popular tax reform (1866–1900) 1.3 The IRS reinvents itself (1913–1970) 1.4 Presidential tax returns (1973) 1.5 Modernization and the Internet (1970–present) 1.6 History of the IRS name 2 Current organization 2.1 Commissioner 2.2 Taxpayer Advocates 3 Tax collection statistics 3.1 Outsourcing collection and tax-assistance 3.2 Administrative functions 4 Criticism 4.1 Allegations of abuse 5 Notes 6 Further reading 7 External links

Summary

George S. Boutwell was the first Commissioner of Internal Revenue under President Abraham Lincoln.

The IRS has its Headquarters office in the greater Washington, D.C. area, and in particular does most of its computer programming in Maryland. It currently operates five service centers around the country (in Austin, TX; Cincinnati, OH; Fresno, CA; Kansas City, MO; and Ogden, UT), at which returns sent by mail are received. These centers do the actual tax processing; different types of tax processing take place in various centers (such as the distinction between individual and business tax processing). The IRS also operates three computer centers around the country (in Detroit, Michigan; Martinsburg, West Virginia; and Memphis, Tennessee). ^[1]

 American Civil War (1861–65)

In July 1862, during the Civil War, President Abraham Lincoln and Congress created the office of Commissioner of Internal Revenue and enacted an income tax to pay war expenses (see Revenue Act of 1862). The position of Commissioner exists today as the head of the Internal Revenue Service.
The Revenue Act of 1862 was passed as an emergency and temporary war-time tax. It copied a relatively new British system of income taxation, instead of trade and property taxation. The first income tax was passed in 1861:

• The initial rate was 3% on income over $800, which exempted most wage-earners.
• In 1862 the rate was 3% on income between $600 and $10,000, and 5% on income over $10,000.
• In 1864 the rate was 5% on income between $600 and $5,000; 7.5% on income $5,000–$10,000; and 10% on income $10,000 and above.

By the end of the war, 10% of Union households had paid some form of income tax, and the Union raised 21% of its war revenue through income taxes.^[2]

 Post Civil War, Reconstruction, and popular tax reform (1866–1900)

After the Civil War, Reconstruction, railroads, and transforming the North and South war machines towards peacetime required public funding. However, in 1872, seven years after the war, lawmakers allowed the temporary Civil War income tax to expire.
Income taxes evolved, but in 1894 the Supreme Court declared the Income Tax of 1894 unconstitutional in Pollock v. Farmers' Loan & Trust Co.. The federal government scrambled to raise money.^[3]
In 1906, with the election of President Theodore Roosevelt, and later his successor William Howard Taft, the United States saw a populist movement for tax reform. This movement culminated in February, 1913, with the ratification of the Sixteenth Amendment to the United States Constitution:

“

The Congress shall have 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.

”

This granted Congress the specific power to create a direct income tax. By February 1913, 36 states had ratified the change to the Constitution. It was further ratified by six more states by March. Of the 48 states at the time, 42 ratified it. Connecticut, Rhode Island, and Utah rejected the amendment; Pennsylvania, Virginia, and Florida did not take up the issue.^[4]
A copy of the very first IRS 1040 form, dated 1913, can be found at the IRS website^[5] showing that only those with incomes of $3,000 (adjusted for inflation, the equivalent of $68,612 in 2011) or more were instructed to file.

The IRS reinvents itself (1913–1970)

People filing tax forms in 1920

In the first year after ratification of the Sixteenth Amendment, no taxes were collected--instead, taxpayers simply completed the form and the IRS checked it for accuracy. The IRS's workload jumped by ten-fold, triggering a massive restructuring. Professional tax collectors began to replace a system of "patronage" appointments. The IRS doubled its staff, but was still processing 1917 returns in 1919. ^[6]
Currently, only the IRS Commissioner and Chief Counsel are political appointees selected by the President and confirmed by the United States Senate.
The agency continued to re-invent itself both organizationally, and technologically.

 Presidential tax returns (1973)

From the 1950s through the 1970s, the IRS began using cutting-edge technology such as microfilm to keep and organize records. Easy access to this information proved controversial, when President Richard Nixon's tax returns were leaked to the public. His tax advisor, Edward L. Morgan, became the fourth law-enforcement official to be charged with a crime during Watergate.^[7]
John Requard Jr., accused of leaking the documents, collected delinquent taxes in the slums of Washington. In his words:

“

We went after people for nickels and dimes, many of them poor and in many cases illiterate people who didn't know how to deal with a government agency.

”

He admits he saw the returns, but denies he leaked them. When asked if he would have leaked the documents, he said: "I probably would have said, 'Yes, I'm in'."^[8]
Reporter Jack White of The Providence Journal, won the Pulitzer Prize for reporting about Nixon's tax returns. Nixon, with a salary of $200,000, paid only $792.81 in federal income tax in 1970 and $878.03 in 1971, with deductions of $571,000 for donating "vice presidential papers".^[9] This was one of the reasons for his famous statement: "Well, I'm not a crook. I've earned everything I've got."
So controversial was this leak, that most later US Presidents released their tax returns (though sometimes only partially). These returns can be found online at the Tax History Project.

 Modernization and the Internet (1970–present)

After microfilm, the 1960s onward saw massive computerization efforts.
In 1995, the IRS began to use the public Internet for electronic filing. Since the introduction of e-filing, self-paced online tax services have flourished, augmenting and sometimes replacing tax accountants to prepare returns.