The Internal Revenue Service (IRS) stands as one of the most influential federal agencies in American life, touching virtually every individual and business through its role in tax collection and enforcement. As the revenue collection arm of the U.S. Department of the Treasury, the IRS collected an astounding $4.7 trillion in fiscal year 2024 – representing approximately 96% of all federal government funding. Understanding how the IRS operates, its services, and your rights as a taxpayer is essential for navigating the American tax system effectively. Whether you’re filing your first tax return or managing complex business obligations, knowledge of the IRS’s structure, functions, and available resources can help you meet your tax responsibilities while protecting your financial interests.
Key Takeaways
- The IRS is America’s tax collection powerhouse: In fiscal year 2024, the agency processed over 271 million tax returns and collected $4.7 trillion in revenue, funding nearly all federal government operations.
- Comprehensive taxpayer services available: The IRS offers extensive free resources including tax preparation assistance, educational programs, and multiple filing options to help taxpayers meet their obligations.
- Enforcement ensures tax system integrity: Through audits, collection activities, and criminal investigations, the IRS maintains tax compliance while generating billions in additional revenue from enforcement actions.
- Organizational transformation underway: The agency is undergoing significant modernization through Inflation Reduction Act funding, improving technology, customer service, and enforcement capabilities.
- Taxpayer rights are protected: The IRS operates under strict guidelines to ensure fair treatment, with multiple avenues for appeals, assistance, and resolution of tax disputes.
What is the Internal Revenue Service (IRS)?
The Internal Revenue Service is the federal agency responsible for collecting taxes and enforcing the Internal Revenue Code – the main body of federal tax law in the United States. Operating as a bureau within the U.S. Department of the Treasury, the IRS serves as the primary revenue collection mechanism for the federal government, funding everything from national defense to social programs.
The IRS’s mission statement clearly defines its dual role: “Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.” This mission reflects the agency’s commitment to both taxpayer assistance and tax law enforcement, recognizing that voluntary compliance forms the foundation of the American tax system.
The agency’s scope is massive. In fiscal year 2024, the IRS processed more than 271.5 million tax returns and related forms, issued $659 billion in refunds, and closed over 505,000 tax return audits. These numbers underscore the IRS’s central role in American economic life and highlight why understanding its operations matters for every taxpayer.
IRS Organizational Structure and Leadership
The IRS operates under a modern organizational structure designed to efficiently serve taxpayers with similar needs while maintaining strong oversight and accountability. In December 2023, the agency implemented its first major structural reorganization in over two decades to better align with transformation goals and improve operational efficiency.
Executive Leadership
At the top of the IRS hierarchy sits the Commissioner of Internal Revenue, appointed by the President and confirmed by the Senate for a five-year term. Billy Long was nominated as Commissioner in December 2024, taking leadership of an agency with over 90,000 employees and a multi-billion-dollar budget. The Commissioner reports to the Secretary of the Treasury and is responsible for overall agency administration and policy implementation.
Below the Commissioner, the new structure features a single Deputy Commissioner position, streamlining decision-making and operational coordination. This represents a significant change from the previous two-deputy model and reflects best practices from both government and private sector organizations.
Four Chief Executive Positions
The restructured IRS now operates through four specialized chief positions, each focusing on critical operational areas:
Chief, Taxpayer Services: Oversees all taxpayer-facing operations including filing season activities, toll-free telephone assistance, Taxpayer Assistance Centers, tax form development, and correspondence management. This position ensures taxpayers receive quality service throughout their interactions with the IRS.
Chief Tax Compliance Officer: Manages all enforcement and compliance activities across the agency, including audits, collections, criminal investigations, and oversight of tax-exempt organizations. This role coordinates efforts to ensure taxpayers meet their legal obligations.
Chief Information Officer: Leads technology modernization efforts, information systems management, and digital transformation initiatives. This position is crucial as the IRS updates decades-old computer systems and implements new taxpayer-facing technologies.
Chief Operating Officer: Handles operational support functions including human resources, financial management, facilities, procurement, and data analytics. This role ensures the agency has the infrastructure and resources needed to fulfill its mission.
Operational Divisions
The IRS organizes its work through several major operating divisions, each specializing in different taxpayer segments. The Large Business and International Division handles corporations with assets of $10 million or more and international tax matters. The Small Business/Self-Employed Division serves smaller businesses and self-employed individuals. The Wage and Investment Division assists individual taxpayers, particularly wage earners. The Tax Exempt and Government Entities Division oversees non-profit organizations, retirement plans, and government entities.
IRS Services and Programs for Taxpayers
The IRS provides extensive services designed to help taxpayers understand and meet their tax obligations. These programs range from basic tax preparation assistance to specialized educational resources, reflecting the agency’s commitment to customer service and voluntary compliance.
Free Tax Preparation Services
The Volunteer Income Tax Assistance (VITA) program represents one of the IRS’s most valuable taxpayer services. Operating for over 50 years, VITA provides free tax preparation assistance to individuals who generally make $67,000 or less, persons with disabilities, and limited English-speaking taxpayers. In fiscal year 2024, over 72,000 volunteers prepared nearly 2.8 million returns through VITA sites located in community centers, libraries, and other convenient locations nationwide.
The Tax Counseling for the Elderly (TCE) program offers specialized assistance to taxpayers aged 60 and older, focusing on pension and retirement-related tax questions. Many TCE sites are operated by AARP volunteers who receive IRS certification and training to ensure quality service.
All VITA and TCE volunteers must complete comprehensive training that meets or exceeds IRS standards, including privacy and confidentiality requirements. Each return prepared at these sites undergoes quality review before filing, ensuring accuracy and completeness.
Digital Services and Online Tools
The IRS has significantly expanded its digital offerings in recent years. The IRS Free File program allows taxpayers with adjusted gross income of $84,000 or less to prepare and file their federal tax returns online at no cost using guided tax software. For higher-income taxpayers, Free File Fillable Forms provide electronic versions of IRS paper forms.
The agency’s newest offering, IRS Direct File, allows eligible taxpayers to prepare and file their federal tax returns directly with the IRS online for free. This service represents a major step in the agency’s digital transformation, providing taxpayers with another convenient filing option.
Online Account services allow taxpayers to access their tax records, make payments, view notices, and manage their accounts securely. These self-service options provide 24/7 access to important tax information and reduce the need for phone calls or office visits.
In-Person Assistance
For taxpayers who need face-to-face help, the IRS operates Taxpayer Assistance Centers (TACs) across the country. These offices provide services including tax form distribution, account adjustments, payment plan setup, and assistance with tax-related identity theft. Since the Inflation Reduction Act, the IRS has opened or reopened 54 TACs, expanding access to in-person services in underserved communities.
The IRS also conducts Community Assistance Visits in rural and underserved areas, bringing tax services directly to communities that might otherwise have limited access to IRS assistance.
Tax Enforcement and Compliance
While taxpayer service receives significant attention, the IRS’s enforcement activities are equally important to maintaining the integrity of the tax system. The agency uses a combination of automated systems and human expertise to identify and address non-compliance, ensuring that all taxpayers pay their fair share.
Audit and Examination Activities
IRS audits, formally called examinations, verify the accuracy of tax returns and ensure taxpayers report income correctly and claim appropriate deductions and credits. In fiscal year 2024, the IRS closed 505,514 tax return audits, resulting in over $29 billion in recommended additional tax. The agency uses sophisticated data analytics to select returns for examination, focusing resources on cases with the highest potential for non-compliance.
The IRS conducts different types of examinations depending on the complexity of the issues involved. Correspondence audits, handled entirely by mail, address simple issues like missing forms or mathematical errors. Office audits require taxpayers to visit an IRS office to discuss specific items. Field audits, conducted at the taxpayer’s location, handle the most complex cases involving businesses or high-income individuals.
Collection Activities
When taxpayers fail to pay their taxes on time, the IRS Collection function works to collect the unpaid amounts. This process begins with automated notices and can escalate to more intensive collection actions including liens, levies, and asset seizure in severe cases. However, the IRS emphasizes working with taxpayers to find reasonable payment solutions whenever possible.
The agency offers various payment options for taxpayers who cannot pay their full tax liability immediately. Installment agreements allow taxpayers to pay their debt over time, while offers in compromise may allow qualified taxpayers to settle their tax debt for less than the full amount owed. These programs recognize that financial hardship can affect anyone and provide paths to resolve tax obligations without excessive penalty.
Criminal Investigation
IRS Criminal Investigation (CI) represents the law enforcement arm of the agency, investigating potential criminal violations of the tax code. CI special agents work on cases involving tax evasion, money laundering, public corruption, and other financial crimes. While criminal cases represent a small percentage of overall IRS activities, they play a crucial role in deterring willful non-compliance and maintaining public confidence in the tax system.
IRS Budget and Modernization Efforts
The IRS operates on a complex budget structure combining annual congressional appropriations with supplemental funding from the Inflation Reduction Act (IRA). Understanding this funding is important because it directly affects the services and enforcement capabilities available to taxpayers.
Annual Appropriations
For fiscal year 2025, Congress appropriated $12.3 billion for IRS operations, distributed across three main categories. Enforcement activities receive $5.4 billion (44% of the total), reflecting the priority placed on ensuring tax compliance and generating revenue through audit and collection activities. Operations support receives $4.1 billion (33%) to cover infrastructure, technology, and administrative functions. Taxpayer services receive $2.8 billion (23%) for programs that directly assist taxpayers in meeting their obligations.
These appropriations represent flat funding compared to prior years, with no adjustment for inflation. This constraint has required the IRS to use supplemental IRA funding to maintain current service levels and continue modernization efforts.
Inflation Reduction Act Funding
The Inflation Reduction Act of 2022 provided the IRS with $79.4 billion in supplemental funding over ten years, representing the largest investment in tax administration in decades. However, subsequent congressional action rescinded $21.6 billion, leaving $57.8 billion available through September 2031.
As of March 2025, the IRS has spent approximately $13.8 billion of this funding across multiple priorities. Operations support has received $6 billion for technology modernization and infrastructure improvements. Business systems modernization has received $2.7 billion to replace aging computer systems. Enforcement has received $2.7 billion to hire additional auditors and collection officers. Taxpayer services has received $2.2 billion to improve customer service and expand assistance programs.
Transformation Initiatives
The IRA funding enables comprehensive modernization of IRS operations through the Strategic Operating Plan, which guides transformation efforts across five key areas. Customer service improvements include expanded telephone assistance, online services, and in-person support. Technology modernization focuses on replacing decades-old computer systems with modern, secure, and user-friendly alternatives. Enforcement capabilities are being enhanced through hiring specialized personnel and improving case management systems.
These transformation efforts are already showing results. The 2025 filing season achieved an 87% level of service on telephone calls, compared to just 15.5% in 2022. Processing times have improved, and taxpayers have access to new digital tools that weren’t available just a few years ago.
Tax Filing and Important Deadlines for 2025
Understanding key tax deadlines and filing requirements is essential for avoiding penalties and staying compliant with federal tax law. The IRS publishes comprehensive deadline information to help taxpayers plan their tax activities throughout the year.
Major Filing Deadlines
The 2025 tax filing season officially began on January 27, 2025, when the IRS started accepting and processing individual income tax returns for tax year 2024. The standard filing deadline remains April 15, 2025, for calendar year filers. This deadline applies to both filing your return and paying any taxes owed.
Taxpayers who cannot meet the April 15 deadline can request an automatic six-month extension by filing Form 4868 by the original due date. This extension allows until October 15, 2025, to file the return, but it does not extend the deadline for paying taxes owed. Any unpaid taxes will accrue interest and penalties from the original April 15 deadline.
Special deadlines apply to specific taxpayer groups. Partnerships and S corporations must file their returns by March 17, 2025. U.S. citizens and resident aliens living abroad automatically receive an extension to June 16, 2025, to file their returns.
Quarterly Estimated Tax Payments
Taxpayers who don’t have sufficient tax withheld from their income must make quarterly estimated tax payments. The 2025 estimated tax payment schedule requires payments on January 15, April 15, June 16, and September 15, with a final payment due January 15, 2026. Missing these deadlines can result in underpayment penalties, even if you receive a refund when you file your annual return.
Electronic Filing and Direct Deposit
The IRS strongly encourages electronic filing, which reduces errors, speeds processing, and provides faster refunds. Over 96% of individual tax returns are now filed electronically, with most prepared using commercial tax software or by tax professionals. Electronic filing also enables direct deposit of refunds, which is significantly safer than paper checks. According to the Treasury’s Bureau of the Fiscal Service, paper refund checks are 16 times more likely to have problems such as being lost, stolen, or misdirected.
Frequently Asked Questions
Q: What should I do if I receive an IRS notice or letter?
A: Don’t panic, but do respond promptly. Most IRS notices address routine issues like missing forms, mathematical errors, or requests for additional information. Read the notice carefully to understand what’s being requested, gather the necessary documents, and respond by the deadline provided. If you disagree with the notice or don’t understand it, you can call the phone number provided or seek help from a tax professional. Keep copies of all correspondence and any supporting documents you send to the IRS. Many issues can be resolved quickly with proper documentation and timely response.
Q: How can I check the status of my tax refund?
A: The fastest way to check your refund status is through the “Where’s My Refund?” tool on IRS.gov or the IRS2Go mobile app. You’ll need your Social Security number, filing status, and the exact refund amount shown on your return. The tool is updated daily, usually overnight, and provides the most current information about your refund. If you filed electronically and chose direct deposit, you can typically expect your refund within 21 days. Paper returns or returns with errors may take longer to process. You can also call the automated refund hotline at 800-829-1954, but the online tool provides the same information more quickly.
Q: What free services does the IRS offer to help with tax preparation?
A: The IRS offers several free tax preparation options depending on your situation. If your adjusted gross income is $67,000 or less, you may qualify for free tax preparation through the Volunteer Income Tax Assistance (VITA) program, where IRS-certified volunteers prepare your return at community locations nationwide. The Tax Counseling for the Elderly (TCE) program provides similar services with a focus on taxpayers aged 60 and older. If your income is $84,000 or less, you can use IRS Free File software to prepare and file online for free. The new IRS Direct File program allows eligible taxpayers to prepare and file directly with the IRS at no cost. All of these programs include electronic filing and can help ensure you claim all credits and deductions you’re entitled to receive.
Q: Can I set up a payment plan if I can’t pay my taxes in full?
A: Yes, the IRS offers several payment options for taxpayers who cannot pay their full tax liability immediately. Short-term payment plans allow up to 180 days to pay with minimal fees. Long-term installment agreements can extend payments over several years, though interest and penalties continue to accrue on the unpaid balance. You can apply for payment plans online through your IRS Online Account, which is typically faster and more convenient than applying by phone or mail. For taxpayers experiencing significant financial hardship, the IRS also offers “currently not collectible” status, which temporarily suspends collection activities. In extreme cases, an offer in compromise might allow you to settle your tax debt for less than the full amount owed, though this option has strict qualification requirements.
Q: How does the IRS select returns for audit?
A: The IRS uses a combination of computer screening and manual review to select returns for examination. The primary screening system, called the Discriminant Index Function (DIF), uses statistical analysis to identify returns with the highest potential for tax changes. Returns with unusual deductions relative to income, mathematical errors, or missing forms are more likely to be selected. The agency also conducts random audits to measure overall compliance levels. Certain issues automatically trigger review, such as significant charitable deductions, business losses, or international transactions. However, being selected for audit doesn’t necessarily mean you’ve done anything wrong – the IRS examines many returns to verify accuracy and ensure all taxpayers are treated fairly. Most audits are resolved through mail correspondence without the need for in-person meetings.
Your Rights and Responsibilities as a Taxpayer
The relationship between taxpayers and the IRS is governed by both legal requirements and established rights that ensure fair treatment throughout the tax administration process. Understanding these rights and responsibilities helps protect your interests while fulfilling your tax obligations.
The Taxpayer Bill of Rights outlines ten fundamental rights that apply to all interactions with the IRS. These include the right to be informed about tax laws and IRS procedures, the right to quality service, the right to pay only the correct amount of tax, and the right to challenge the IRS’s position and be heard. You also have the right to appeal IRS decisions, the right to finality in tax matters, and the right to privacy and confidentiality in your tax affairs.
When disputes arise, multiple resolution options are available. The Independent Office of Appeals provides an administrative forum for resolving tax controversies without litigation. The Taxpayer Advocate Service, an independent organization within the IRS, assists taxpayers experiencing economic harm or significant hardship due to IRS actions. Low Income Taxpayer Clinics, operating independently from the IRS, provide representation and education to qualifying taxpayers in disputes with the agency.
Your primary responsibility as a taxpayer is to file accurate and complete tax returns by the required deadlines and pay any taxes owed. This includes reporting all income, claiming only legitimate deductions and credits, and maintaining records to support the information on your returns. When you cannot meet these obligations, contacting the IRS promptly often leads to better outcomes than waiting for the agency to initiate collection actions.
The Future of Tax Administration
The Internal Revenue Service stands at a pivotal moment in its history, undergoing the most significant transformation since its establishment. With substantial investment through the Inflation Reduction Act and new leadership committed to modernization, the agency is working to build a more efficient, customer-friendly, and effective tax administration system for the 21st century.
For taxpayers, these changes mean improved services, faster processing, better customer support, and enhanced online capabilities. The continued emphasis on voluntary compliance, combined with more effective enforcement of tax laws, supports a fair system where all taxpayers meet their legal obligations. As the IRS evolves, staying informed about available services and your rights ensures you can navigate the tax system successfully while taking advantage of the resources designed to help you comply with federal tax requirements.
Whether you’re filing a simple individual return or managing complex business tax obligations, understanding the IRS’s role, services, and procedures empowers you to handle your tax responsibilities with confidence. The agency’s mission to provide quality service while ensuring fair enforcement of tax laws creates a framework for successful taxpayer interactions, supported by comprehensive resources and established rights that protect your interests throughout the process.