IRS stands for Internal Revenue Service and it is a governmental agency that collects taxes. Learn all about the meaning of IRS!
Late last year, the corporate world was astonished by emerging reports that six of Silicon Valley’s largest firms had a combined tax gap of up to $100 billion.
This mind-boggling figure goes to show the questionable tax conduct among most companies. But there have been rising concerns regarding the extent to which business owners understand their tax obligations, reliefs, and the consequences of tax evasion.
Such apprehensions have cast a shadow on existing awareness of the meaning of the IRS and how it works. While ignorance of the law is no defense, the lack of understanding of the importance of the IRS has put many businesses on a collision course legally.
Is your business keen on tax law abidance? Learn all about the meaning of IRS and its functions here.
What Is the Meaning of the Internal Revenue Service (IRS)?
You must have heard of the IRS in connection with tax compliance. But do you understand the role and the meaning of the IRS? Well, most businesses have limited information about this crucial federal institution.
The initials IRS stands for the Internal Revenue Service in the United States under the Department of Treasury. The Commissioner of Internal Revenue is in charge of all the operations at the bureau, with the authority of the United States federal government.
Have you been wondering, “is the IRS a government agency?” The answer is in the affirmative. The IRS is a U.S. federal agency charged with the primary responsibility of collecting all forms of taxes.
From a corporate point of view, the IRS has the legal mandate to enforce all the existing tax laws. However, a big chunk of work at the IRS involves the collection of income tax, both corporate and individual.
What Are the Core Functions of the Internal Revenue Service (IRS)?
The IRS administers the federal tax regulations that are enacted by Congress. This means that the agency doesn’t have direct powers to set and implement laws. However, the Internal Revenue Service plays three critical roles in the course of overseeing tax administration.
Tax Return Processing
Once you have e-filed, there’s a waiting period during which the system typically indicates it’s processing your returns. This waiting period involves tax return processing.
During the period, the IRS engages in three vital stages. The acceptance stage is the first phase, where the receipt of returns is acknowledged.
The next phase involves the scrutiny of your filed returns. The IRS will then move to the refund approved/declined stage depending on the IRS’ findings. This process may be completed within two weeks upon filling.
Enforcement of Tax Laws
All businesses must be aware of the underlying tax laws that govern their operations. The IRS ensures compliance with these laws, rules, and standards with stringent penalties in case of default. As such, the IRS can commence criminal investigations in cases of suspected violations of the Internal Revenue Code.
The IRS is responsible for administering taxes and providing all other tax-related services. Such activities include providing tax filing assistance to taxpayers. You can also refer to the IRS in case you’ve any concerns, such as erroneous tax filing.
What Is a Tax Refund?
As a taxpayer, the IRS should give you a tax refund after calculating your tax obligation. Depending on your source of income, some tax credits are refundable. If you pay more taxes during a financial year than you owe the IRS, you may be eligible for a cash refund from your excess tax remittances.
What Are Tax Reliefs?
The IRS considers specific tax reliefs on the amount of tax you owe as a business or individual.
Such tax reliefs may include the allowable deductions for pensions. In case of a substantial debt owed to the IRS over extended periods, you can apply for the Offer in Compromise (OIC), which is an indication of your acceptance of tax liability.
Once you apply for the OIC, the IRS can extend tax reliefs, which reduces your total tax burden substantially. Depending on your current income, you may be eligible to pay back the remainder of the tax burden gradually within your income capacity.
Differentiating Tax Evasion from Tax Avoidance
It’s not enough to discuss the meaning of the IRS and its functions without addressing the dynamics around tax evasion.
Tax evasion is the use of illegal means to intentionally evade the set tax laws and stipulations when filing taxes. Such tax fraud can result in fines or imprisonment.
Tax avoidance, on the other hand, is legal and often includes the use of tax laws in a given territory to reduce the amount of tax obligation. But if not approached carefully, the IRS may find you liable for tax evasion under certain circumstances.
Why You Need a Tax Professional
You must be feeling overwhelmed with all this information.
Understanding the operations of the Internal Revenue Service can be an uphill task for most business owners. You are in luck, though. This is because you have the option of focusing on what you do best while a taxation law specialist handles all your tax resolution needs.
If you have an outstanding open debt with the IRS, there’s a way of minimizing the liability significantly. You only need to consult reliable tax experts with your tax information and your tax problem recovery process will be done in a jiffy.
Filing the IRS Form 2848
But before the IRS can deal with your tax-related issues through a third party, you need to fill in form 2848.
The document, also known as a Power of Attorney and Declaration of Representative, gives your tax agent of choice the express authority to undertake specific actions at your behest. You may need to fill in the tax form indicating the specific period within which the grant is applicable.
Once you have surrendered your tax resolution needs to a tax agent, you no longer have to worry about tax evasion, reliefs, and refunds. The professionals will have you covered.
Don’t Be Found Napping By the IRS – Get Your Facts Right
Ignorance of the law is not admissible as a defense in court. Tax evasion can land you in hot soup if you don’t understand the role and meaning of the IRS. But with the right information, you may also be eligible for tax refunds, exemptions, and relief.
You may need to source a reliable tax professional to help you out with the process of tax resolution. This will ensure that you remain in the good books of the Internal Revenue Service.
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