What is the IRS (Internal Revenue Service)?

What is the IRS (Internal Revenue Service)?

If you’re considering opening a business in the United States, you’ve likely been gathering information about each of the processes.

For example, the types of structures (LLC, C Corp, S Corp, etc.), taxes, requirements, among other pieces of information.

And among all the information circulating on the internet, you’ve probably come across the word “IRS” on several occasions.

You decided to research, and now you’re here in this article.

So, let’s get started.

What is the IRS and what is its mission?

The word IRS is an abbreviation for “Internal Revenue Service,” in Spanish, “Servicio Interno de Impuestos.”

It’s an office of the Department of the Treasury, also considered one of the most efficient tax administrators in the world.

The IRS administers the Internal Revenue Code, enacted by Congress, and collects the nation’s taxes.

What it achieves is providing high-quality service to U.S. taxpayers when it comes to fulfilling their tax responsibilities.

How does it do that?

Well, by helping them understand the steps they need to take to enforce the law correctly.

What happens if you don’t pay your taxes to the Internal Revenue Service on time?

If a U.S. taxpayer doesn’t pay their taxes by the deadline, a late-payment penalty of ½ of 1 percent of the unpaid taxes will be added.

The penalty will be applied each month after the deadline by which these taxes should have been paid.

You won’t have to pay a penalty for filing late if you provide a reasonable cause for why you didn’t pay on time.

A penalty can also be applied for making an incomplete payment of the total amount owed to the IRS.

It’s ideal to file your federal tax return on time every year even if you can’t pay all the taxes you owe.

Because the penalty for failure to pay is always less than the penalty for failure to file. By doing this, you could reduce additional interest and penalties if you at least pay as much as you can of your return.

If you requested an extension to file after the tax deadline and your payment was at least 90% of your tax liability, you could avoid a penalty by paying the remaining percentage by the extension due date.

Speaking of costs, if you file your tax return 60 days after the deadline or extended due date, the minimum penalty would be between $135 or 100% of the unpaid tax.

A brief history of the IRS

The history of the IRS dates back to the 1800s, specifically in 1862 (20 years after the founding of the Department of the Treasury).

On July 1 of that year, President Abraham Lincoln signed into law the second income measure of the Civil War.

As a result, internal taxes began to be collected, and a permanent internal revenue system was established.

Under the Department of the Treasury, Congress established the Office of the Commissioner of Internal Revenue (that’s what it was originally called).

In 1953, the name change to “Internal Revenue Service (IRS)” was formalized by the Department of the Treasury’s decision. However, this name had already been in use for years, starting in 1918 when they began using it on a tax form.

Today, the IRS is the official tax administrator in the United States and has also earned the reputation of being the world’s leading financial investigation unit.

Did this information help you?

I hope it did. If you still have doubts about certain processes to start your business in the United States, remember that at Rex Legal, we can assist and advise you every step of the way.

Contact us, and we will be happy to help.

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