Most of us have dealings with the IRS because, as Benjamin Franklin famously said, death and taxes are the only two certainties we have in life, but most of us don’t really know a whole lot about the federal agency charged with collecting our taxes.
Let’s change that by taking a look at some of the most interesting facts you might not know about the IRS.
1. People have always hated it
If you don’t hate the IRS, you are probably in the minority amongst your fellow citizens. In fact, the United States has a long history of hating the IRS dating back as far as its creation in 1861 when it was introduced to collect a flat 3 percent tax on all earnings above $800. So unpopular was the measure that it was done away with in 1872 in favor of taxing goods like liquor and tobacco instead. Obviously, that decision was reversed in time, but it still proves to be an unpopular change till this day.
2. Taxpayers spend approximately 3.8 billion hours each year complying with tax laws
Federal tax laws can be complicated for the average person to understand, so it is not surprising that a study conducted by the National Taxpayers Union, back in 2009, found that U.S. taxpayers spent 3.8 billion hours ensuring they were fully compliant with federal tax laws, and many of them will still have been hit with the kind of tax problems, like IRS tax penalties and delinquent taxes, that companies like https://creativetax.io/ can help you solve. Why? Because as we said, tax laws can be complicated and people make mistakes all the time – in 2019, it was reported that 80 percent of taxpayers made a mistake that could risk their tax refunds and that’s just one example.
3. There are more than 75,000 pages to the tax code
As if the above wasn’t a good enough reason to get an accountant or use tax software, the fact that the tax code is more than 75,000 pages long should be! It’s not surprising people make so many mistakes with such a long and complex process to deal with!
4. It put Al Capone in prison
It may sound amazing, but notorious mobster Al Capone was not put away for any of his violent gangland activities, but because he hadn’t paid his taxes. Despite his best efforts to not leave a paper trail, IRS agent Frank Wilson finally found a document – payments to Capone that had not been listed – after combing through approximately 2 million documents. That’s dedication! It’s also proof that the IRS isn’t all bad.
5. There’s a 15 percent tax gap
It is estimated that the IRS is unable to recoup as much as 15 percent of what it is owed. This is known as the tax gap, and it is caused by a variety of issues from taxpayers making errors to deliberately underreporting their incomes. It’s estimated that this adds up to $385 billion, which means the IRS does manage to collect around $2 trillion from the American public each year, which is a staggering sum to think about.
6. There are 500 income tax forms and schedules available
One of the yet other important reasons why you need professional help to manage your taxes effectively is because a huge number of forms are there on the IRS website and it can totally confuse you! Like we discussed above, the tax code is a lengthy one with 75,000 long pages, there is also a repository of 500 different forms and schedules available on the IRS website which include documents for retirees, college-going students, self-employed taxpayers, and the recipients of social security. So, doing it all by yourself would be quite frustrating!
7. IRS doesn’t have a good data backup
All of us who use computers frequently for our work, academics, or personal use know very well how important it is to have a backup of all the valuable information that is there in our systems. But, unfortunately, the IRS doesn’t seem to know that!
According to a report by the Treasury Department, there is no sufficient data backup available with the IRS when it comes to taxpayer records. Also, they don’t have a plan to start backing up the data anytime soon. On that note, it is clear that there is always a possibility of all the taxpayer and management information getting lost at any point in time. So, it’s high time now that the IRS starts being more mindful in its acts!
8. The IRS receives above 130 million tax returns per year
The United States of America has above 300 million citizens and they file almost more than 130 million returns every year. The IRS has implemented several options like electronic filing and online programs in the past few years to manage the increased workload effectively.
9. There are fewer chances of audits now
As the number of staffers and resources has remarkably reduced due to the downsizing of the budget, the IRS has decided to audit less than 1% of the total tax returns of the country. The only exception in this scenario is the people whose income is over $ 1 million. Their chances of getting audited is 10% when compared to everyone else who are making less than that.
So, all that you need to do is just ensure that you are avoiding certain alarming situations like you have a bad tax preparer, you belong to the gig economy, you are filing manually, etc. and the chances of IRS auditing you will be almost nullified.
10. More than 90% of taxpayers file their returns online
The IRS wants everyone to file their taxes online. To process a written tax return costs the IRS double the amount than it has to otherwise spend for processing an online return. Also, the manual tax return is way more time-consuming for the IRS than an online return because there are not many agents available with them now to input the data.
Although taxpayers were concerned about how secure it is to do their returns online when e-filing first came into the picture, the IRS has been always prompt with its refund deliveries. So, e-filing has become the most preferred method of a tax return in the country now. The IRS is more interesting than you think!