IRS (Internal Revenue Service)
The federal agency responsible for collecting taxes and enforcing tax laws in the United States. The IRS processes tax returns, issues refunds, and conducts audits.
The Internal Revenue Service (IRS) is a bureau of the US Department of the Treasury responsible for administering and enforcing federal tax laws. It processes more than 150 million individual tax returns each year, collects over $4 trillion in revenue, and distributes hundreds of billions in refunds.
The IRS performs several key functions: processing tax returns and issuing refunds, collecting unpaid taxes, conducting audits and examinations, providing taxpayer assistance and education, and issuing rulings and regulations that interpret the tax code. The agency operates through multiple divisions, including individual, small business/self-employed, large business, and tax-exempt organizations.
Taxpayers have specific rights when dealing with the IRS, codified in the Taxpayer Bill of Rights. These include the right to be informed, the right to quality service, the right to pay no more than the correct amount of tax, the right to challenge the IRS position, and the right to appeal. If you have a dispute with the IRS, the Taxpayer Advocate Service provides free assistance.
How it works
The IRS is the federal bureau within the Treasury Department responsible for administering the tax code — processing returns, collecting revenue, issuing refunds, and enforcing compliance. It handles more than 150 million individual returns each year and collects over $4 trillion in federal revenue, while also distributing hundreds of billions of dollars in refunds back out.
You interact with the IRS at nearly every step of the tax process — filing your return, receiving a refund or a balance-due notice, requesting an extension, or responding to a request for documentation. Behind the scenes it operates through several divisions handling individuals, small businesses and the self-employed, large businesses, and tax-exempt organizations, each with somewhat different processes and priorities.
Taxpayers have specific, codified protections when dealing with the agency under the Taxpayer Bill of Rights — including the right to be informed, the right to pay no more than the correct amount of tax, the right to challenge the IRS's position, and the right to appeal a decision. If a dispute with the IRS cannot be resolved through normal channels, the Taxpayer Advocate Service, an independent office within the IRS, provides free help, which many taxpayers do not realize exists.
Example: using the Taxpayer Advocate Service
A taxpayer's refund has been delayed for several months with no clear explanation from the standard IRS phone line, and normal follow-up attempts have gone nowhere.
They contact the Taxpayer Advocate Service, an independent office inside the IRS created specifically to help taxpayers facing this kind of unresolved problem, at no cost, to get the case escalated and investigated.
Frequently asked questions
What does the IRS actually do besides collect taxes?
What rights do I have if the IRS disputes my return?
Is there free help available if I have an unresolved problem with the IRS?
Related Terms
Audit
An IRS review of your tax return to verify that income and deductions are reported accurately. Audits can be conducted by mail, at an IRS office, or at your home or business.
Tax Return
The form(s) you file with the IRS to report income, claim deductions and credits, and calculate your tax liability or refund. For individuals, this is Form 1040.
Penalty
A charge imposed by the IRS for filing late, paying late, or underpaying estimated taxes. Common penalties include failure-to-file (5% per month) and failure-to-pay (0.5% per month).
Tax Refund
Money returned to you by the IRS when your total tax payments (withholding + estimated payments + refundable credits) exceed your tax liability for the year.