We all know of the existence of the Internal Revenue Service (IRS) thanks to the tax returns we file every spring. Nevertheless, how much do you really know about the agency? Do you know when it was established and for what purpose? The IRS is an interesting entity with a long history and an intriguing evolution.
The IRS began as a wartime effort under President Abraham Lincoln in 1862. His signing of the Revenue Act established the office of the Commissioner of Revenue and enabled the U.S. government to collect a temporary income tax to pay for the war effort. However, as with anything else government establishes, the word ‘temporary’ is just a formality. Income tax continues to be collected even after the original act expired in 1872.
In 1894, the Supreme Court ruled income tax to be unconstitutional, leaving the federal government scrambling for money to continue the rebuilding efforts that began at the conclusion of the war. By the turn of the 20th century, the push was on to make income tax. That is exactly what happened when Congress ratified the 16th amendment to the U.S. Constitution in 1913. Thus was established the modern Internal Revenue Service and their constitutional authority to raise revenues through income taxes.
The IRS has continued to evolve over the last 100 years. Today, it is a monolithic organization that has been tasked with, among other things, the financial implementation of healthcare reform. It is quite likely that the Congress of 1913 never envisioned the agency that exists today or the power it wields. However, that is not unusual. Laws are often passed in a fishbowl of sorts without any regard to the effect of said laws 50 to 100 years down the road.
With February now here, tax day is fast approaching. Keep in mind that the IRS is as powerful as it has ever been. Pay your taxes and avoid tangling with them. The last thing you need is a lengthy audit that could result in significant tax penalties and interest charges.