How the IRS Works


The Organization of the IRS

The IRS is one of the largest federal agencies outside of the military and the U.S. Post Office. As of 2017, the IRS employed 76,832 people full time [source: IRS]. Although it might seem daunting to understand such a large organization, let's break down the structure of the IRS.

The IRS falls under the Department of the Treasury. The only two appointed positions in the IRS are the Commissioner of Internal Revenue and the Chief Counsel. The president appoints and the Senate confirms candidates for both of these roles. The Commissioner is the head of the IRS and serves a renewable five-year term. The Chief Counsel advises the IRS on legal matters, including interpreting and enforcing tax laws. A nine-member IRS Oversight Board is supposed to ensure that the agency is treating taxpayers fairly and reviews IRS plans, but as of 2019, the IRS Oversight Board has six open seats and has not operated since 2015 [source: Treasury.gov].

Since its reorganization in 2000, the IRS's responsibilities have been divided into four main operating divisions — rather than by geographic region as they were previously — to promote efficiency. These divisions are [source: IRS]:

  • Wage and Investment: Located in Atlanta, Georgia, this division is responsible for processing all 1040 individual income tax forms, which totaled more than 152 million in 2018 [source: IRS].
  • Small Business/Self-employed: An office in the D.C. metro area that addresses self-employed people and small businesses with $10 million or less in assets, a total of approximately 57 million taxpayers.
  • Large Business and International: This division, in Washington, D.C., deals mostly with corporations and partnerships whose assets total more that $10 million.
  • Tax-exempt and Government Entities: This division works with a variety of tax-exempt organizations including universities, pension plans, state governments, political organizations, nonprofit organizations and Native American tribal governments.

The four main divisions of the IRS handle things when all goes relatively smoothly. But, as you may know, this doesn't always happen. Because the tax code is so complex, confusion and disputes between taxpayers and the IRS happen all the time. For this reason, the IRS also manages the Office of Appeals, which attempts to provide an impartial resolution to tax disputes without having to go to court. In addition, the Taxpayer Advocate Office is an independent organization within the agency that offers free assistance to taxpayers with questions or problems.

And then there's the Criminal Investigation (CI) unit, which investigates violations of the tax code. It has also become involved in crimes seemingly unrelated to taxes because people must pay taxes on income, even when that income is illegally obtained. Although sly criminals might elude elite detectives, they find it more difficult to hide their riches. In recent years, the CI unit has invested more resources in identifying fraudulent returns filed by identity thieves including the Questionable Refund Program.