The Internal Revenue Service IRS

The Civil War created the American income tax and the agency that collects it. The Revenue Act of July 1, 1862, established the Office of the Commissioner of Internal Revenue to raise money for the Union armies through taxes on income, liquor, tobacco, and nearly everything else. The income tax lapsed after the war, was struck down by the Supreme Court in 1895, and returned for good with the Sixteenth Amendment in 1913. The bureau took its present name, the Internal Revenue Service, in a 1953 reorganization meant to replace a patronage-ridden agency with a professional one.

The IRS processes about 160 million individual returns and tens of millions of business returns every year and collects roughly five trillion dollars, about 96 percent of all federal revenue. Most of that arrives through withholding from paychecks rather than checks written in April. The agency's work divides into service, which means answering questions, processing returns, and issuing refunds, and enforcement, which means audits, collections, and the Criminal Investigation division that pursues tax fraud and money laundering. The tax code it administers runs to several thousand pages, and the IRS writes the regulations and rulings that explain how it applies.

The Commissioner of Internal Revenue is appointed by the President and confirmed by the Senate for a five-year term, a structure Congress adopted in 1998 to insulate the agency from politics after hearings on taxpayer abuses. The same law created the Taxpayer Advocate Service as an internal ombudsman. The IRS has long been understaffed relative to its workload. A decade of budget cuts reduced audits of high earners and left phone lines unanswered. The Inflation Reduction Act of 2022 gave it eighty billion dollars over ten years to rebuild, money Congress began clawing back the following year.

In 2025 the agency lost roughly a quarter of its workforce through buyouts, layoffs, and attrition, cycled through several acting commissioners, and ended its free Direct File program after a brief pilot. Supporters of the cuts argued the IRS had grown bloated and intrusive. Critics warned that every dollar spent on enforcement returns several in collected taxes and that service would collapse. Whether the smaller agency can process a filing season without serious failures is a question each spring now answers.