It is important that you have the basic knowledge on how the IRS is structured so that you will know how to deal with them, aside from knowing the key dates on when to file income tax returns.
The IRS simply functions on four levels and that the divisions on the different levels may have different name thus making any dealings with the IRS downright confusing if you have no knowledge about them.
The National Level
The IRS is a distinct branch of the Treasury Department of the US government. Its headquarters is in Washington, D.C. The President appoints a commissioner to rule the IRS. The regional commissioners, district directors who are also political appointees make sure that the entire operation of IRS runs smoothly.
The brain of the IRS is contained in the National Computer Center. The purpose of the National IRS office sets the policy while the different tax collection procedures are entrusted to the 33 district offices as well as to the 10 regional service centers. Several sub offices are also present within the district offices of the IRS.
There are nine departments that are distinct in IRS but the only one that has a direct impact to the taxpayers is the Compliance department which has five divisions namely: Appeals, Internal Operations, Examinations, Criminal Investigations and Collections.
The IRS Service Centers
The IRS service centers are the one responsible for procession of tax returns approximately 200 million, yearly. Most of these tax returns are made by individuals. Nearly one trillion dollars are collected by the serve centers with regards to tax payments from about 125 million tax payers and seven million institutions.
The centers are located in different places including in Fresno, Philadelphia, Andover, Kansas City, Atlanta, Holtsville, Cincinnati, Memphis, Ogden and Austin. Each of these service centers has its own computer that tirelessly makes tax notices, collection notice, audit notices and even tax forms. Moreover, tax bill disputes are also entertained in these service centers. Any tax payer can contact the service center by mail but occasionally by phone.
The Processing of Tax Return
From around February to May, the service centers of IRS operate 24-hours a day getting a lot of income extension request, payments and income tax returns. There are a lot of temporary workers that are hired during tax season who are paid minimum wage. The officials from IRS have admitted that a lot of the dispensation errors are committed by the non-regular employees.
The dispensation starts with the machines that open the envelopes of tax return as it removes the tax return and checks it. The transcribers examine the computer to verify the data and enter the key data of the tax return into the computer. The computer then verifies the validity of the formula. Another transcriber then rechecks the work of the previous transcriber by re-inputting the same data and detecting any errors from it.
The tax return data now have magnetic tapes which are then sent to the National Computer center where the return is scored by the computer for audit potential. Now about 10% of the individual income tax return file is selected by the computer at random for further checking. Once done, the files are then returned to the service centers where the human IRS classifiers pick out 10% of the already preselected 10% for audit for checking any probability of mistakes on the tax return. Thus, there are about 1% of all tax returns that are audited by the IRS.
The Taxpayer Service Function
The program was developed during 1980s in order to facilitate communication with the tax payers who owe money to the agency. The regional tax collection system is connected with the computer and is maintained by personnel who work by mail or phone.
The District Office
The United States is divided into a total of 33 IRS districts and each district is headed by a director. The district offices are located in the major cities of the United States and each district office also have sub offices located in smaller cities. Each of these district offices is a service center which can provide each other with information although the exchange of information may cause glitches in the system. On the other hand, if you meet some from the agency then that person might work either from the sub office of a particular district office.
Each of the district office has several divisions and these divisions include the examination, collection, criminal and investigation and problems resolution.
Let’s get to know the four divisions in the IRS district office
Examination Division. Also called as the Examinations division, this division comprise of people who audit tax returns. Theses auditors are also the people whom you meet with at the district office or the ones who come to your home or business to check things up.
Collection Division. People working under this division are called revenue officers and that they are the ones who collects tax dollars. Thus if you go to the sub office of the agency, the people who usually collect the payment are the revenue officers.
Criminal Investigation Division. This division acts out as the police force of the IRS. They work in district offices as well as in service centers and you will less likely meet up with them if you do not make any tax crime.
Problems Resolution Division. This particular division employs IRS troubleshooters called the problems resolution officers. These officers usually resolve issues like red tape and get things done quickly to make the system go back to normal.
There are about 115,000 total employees from IRS thus this agency is considered as the largest agency in the United States. The examination division has about 25% of the manpower while the collection and the criminal investigation accounts for the 15% and 3% man power respectively. The remaining 57% makes the policy, runs the computers and does other tasks in the agency. Due to the large number of employed personnel, there has been a talk on Capitol Hill regarding downsizing the agency to only 85,000 employees.
Now if you are confused about the entire structure of the IRS, then you are not alone. Here are some examples that will surely shed light on the relationship of the different divisions
On the 15th of April, both Arnold and Aimee Tyson filed their income tax return through mail with their service center.
The information regarding their income tax return was passed on to the National Computer Center to be analyzed so that the potential audit score can be given. If the score is high which is true for the Tyson’s, then the return is screened at the service center and if the return has a high audit potential which it is, then it is sent to the district office.
At the district office, the return is then analyzed once more and is then selected for an audit. An agent from IRS makes a call to the Tysons or invites them over at the examination through a notice.
The Tysons creates an appointment with the auditor in a nearby local IRS office or the auditor goes to them. Either way, a meeting should be conducted between the Tysons and the IRS.
The auditor then looks at the record of the Tysons and suspects that there is fraud. The auditor then refers the file of the couple to the Criminal Investigation Division and another agent investigates them. This halts the audit to continue further.
The agent then concludes that errors were made by the Tysons but nevertheless these errors are not serious to be considered as criminal acts. He then sends the file back to the tax auditor so that normal audit can proceed.
The auditor then concludes the audit and sends to the Tysons the examination report which states that they owe the agency additional taxes, penalties and also interests. The Tyson then disagrees with the report submitted to them.
This resorts to the Tysons filing an appeal request with the district office.
The appeal is then heard at the district office and the appeals officer upholds the auditor and this resort the Tysons to file a petition in the Tax Court which is a body independent to the IRS which results to the partial victory of the Tysons in the court.
However, the Tysons still owe the IRS after the hearing. The money that they owe to the IRS are entered in their IRS record.
The Tysons then receive the notices at their service centers but they still refuse to make payment.
The service center gives up collecting but the IRS resorts to making telephone calls from the IRS representative.
But the Tysons still do not pay up and thus their files are sent to a revenue officer who works in the Collection Division.
However, the collection representative is unreasonable after the Tyson tries to work out some collection arrangement and even going as far as threatening to take their properties and wages thus the Tyson seeks help in the problems resolution division.
With the help of a problems resolution officer, they have arranged a payment plan together with the revenue officer.