Keith Mack
The Internal Revenue Service (IRS) is responsible for collecting taxes and enforcing tax laws in the United States. The IRS follows the Internal Revenue Code (IRC), which is part of the United States Code and contains the laws and regulations related to taxes. The IRC is organized into subtitles, chapters, subchapters, and parts, each containing related provisions on specific topics. It is available to the public for free online, and historical versions are also accessible. When searching the IRC, it is important to consider the context of the entire Code, Treasury Regulations, and court decisions that interpret it. Additionally, the IRS publishes other forms of official tax guidance, such as revenue rulings and notices.
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What You'll Learn
The Internal Revenue Code (IRC)
The IRC covers a wide range of tax-related topics, including income taxes, estate and gift taxes, employment taxes, excise taxes, alcohol and tobacco taxes, procedure and administration, the Joint Committee on Taxation, financing of presidential election campaigns, trust fund codes, health benefits for the coal industry, and group health plan requirements. Each of these topics is addressed in a separate subtitle of the IRC.
Treasury regulations, also known as federal tax regulations, provide the official interpretation of the IRC by the US Department of the Treasury. These regulations give directions to taxpayers on how to comply with the IRC's requirements and can be found in Title 26 of the Code of Federal Regulations (26 CFR). An electronic version of the current Code of Federal Regulations is publicly available through the National Archives and Records Administration (NARA) and the GPO.
It is important to note that the IRC is subject to change and updates. When researching a specific tax provision, it is crucial to verify that the information displayed reflects the laws applicable to the tax year being examined. Additionally, Congress may enact laws that influence federal tax law without being a part of the IRC. Historical versions of the United States Code are available electronically on GovInfo, a website maintained by the US Government Publishing Office (GPO).
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Federal tax regulations
Treasury regulations do not create new taxes or enlarge taxing statutes in their interpretations of the IRC. If a regulation's interpretation of the IRC contradicts the IRC's statutory language, a federal court may strike it down. However, the courts often defer to agents like the Secretary of the Treasury for interpretations of statutory language.
The IRS issues three types of regulations: proposed, temporary, and final. Proposed regulations are announced by the IRS through a Notice of Proposed Rulemaking (NPRM) and do not have the force of law. The public can submit comments on proposed regulations, which the IRS considers before issuing final regulations. Temporary regulations are created to provide immediate guidance to the public before final regulations are published and expire three years after issuance. Final regulations are effective regulations issued with the force of law and are published as Treasury Decisions (TDs), which include the regulation's text and a preamble explaining the regulation. TDs are binding on both taxpayers and the IRS.
In addition to regulations, the IRS publishes other forms of official tax guidance, including revenue rulings, revenue procedures, notices, and announcements. Applicable Federal Rates (AFR) rulings, for example, provide prescribed rates for federal income tax purposes. While rulings and procedures reported in the Internal Revenue Bulletin (IRB) may be used as precedents, documents not published in the IRB cannot be relied on as precedents.
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Tax credits
The Internal Revenue Code (IRC) is where you can find the sections on tax credits and deductions. The IRC is part of Title 26 of the United States Code (26 USC), which is available to the public. You can browse "Title 26—Internal Revenue Code" to see the table of contents for the IRC and jump to specific sections. For example, Title 26 Section 24 covers the provision for the Child Tax Credit.
There are various tax credits that individuals may be eligible for, including the Earned Income Tax Credit (EITC), a refundable credit for moderate- and low-income taxpayers. The Child and Dependent Care Credit is another example, which applies to taxpayers who pay for the care of their child, spouse, or dependent so they can work, study, or look for work.
To claim credits, you can answer questions in your tax filing software, or complete a form and attach it if filing a paper return. The Interactive Tax Assistant is an anonymous tool that individuals can use to get answers to common tax law questions based on their specific circumstances.
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Historical tax laws
The history of taxation in the United States is a dynamic and ever-changing landscape, with tax laws evolving annually and at times, even more frequently. America's earliest citizens enjoyed minimal to no taxation, but this landscape shifted over time, with the introduction and occasional repeal of various taxes. The country's taxation journey has been a shapeshifting beast, to say the least.
In 1767, the Townshend Revenue Act was passed, imposing taxes on common products imported into the American Colonies, such as lead, paper, paint, glass, and tea. This marked a significant shift in taxation, as it was a tax on imports, collected from ship captains upon cargo unloading. The Townshend Acts also established three new admiralty courts to try Americans who ignored the laws, showcasing the seriousness of tax compliance.
The United States Constitution, ratified in 1789, played a pivotal role in shaping taxation. Benjamin Franklin's famous quote, "Nothing is certain in this world but death and taxes," underscores the enduring presence of taxation in the nation's history. The Constitution's Necessary and Proper Clause provided guidelines for legislation on taxation, empowering the legislative branch to judge and the people to overturn any abuse of those powers.
The 19th century witnessed the imposition of income taxes to fund war efforts, marking a significant shift in taxation policy. The American Civil War, which began in 1861, prompted the first federal income tax. President Lincoln signed into law a revenue-raising measure to fund the Civil War expenses, creating a Commissioner of Internal Revenue and levying a 3% tax on incomes between $600 and $10,000, and a 5% tax on incomes exceeding $10,000. This marked the inception of the modern progressive tax system, with allowances for deductions.
The Revenue Act of 1861, enacted during the Civil War, levied a 3% tax on all incomes over $800. This act was rescinded in 1872. The Wilson Tariff Act of 1894 briefly revived the income tax, but it was struck down by the Supreme Court in 1895. The turn of the century brought a general return to prosperity, softening the demand for tax reform. However, the progressive wing of the Republican Party continued to advocate for an income tax.
The 20th century witnessed significant tax reforms, including the introduction of the federal income tax through the 16th Amendment in 1913. Roosevelt's New Deal and World War II led to tax increases to boost the economy, with the top tax rate soaring to 79% by 1936. The Revenue Act of 1942, hailed by President Roosevelt as "the greatest tax bill in American history," further transformed the tax landscape. The Tax Reform Act of 1986, signed by President Reagan, was another landmark legislation, containing 300 provisions and taking three years to implement.
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Tax rulings and procedures
The Internal Revenue Service (IRS) publishes various forms of official tax guidance, including revenue rulings, revenue procedures, notices, and announcements. These are published in the Internal Revenue Bulletin (IRB) for the information and guidance of taxpayers, IRS personnel, and tax professionals.
Revenue rulings are official interpretations of the Internal Revenue Code (IRC) by the IRS, related statutes, tax treaties, and regulations. They are the IRS's conclusions on how the law is applied to a specific set of facts. For example, a revenue ruling may state that taxpayers can deduct certain automobile expenses.
Revenue procedures are official statements of procedures that affect the rights or duties of taxpayers or other members of the public under the IRC, related statutes, tax treaties, and regulations. They provide return filing or other instructions concerning an IRS position. For example, a revenue procedure might specify how taxpayers entitled to deduct certain automobile expenses should compute them by applying a certain mileage rate instead of calculating actual operating expenses.
The IRS also issues private letter rulings (PLR), which are written statements interpreting and applying tax laws to a taxpayer's specific set of facts. A PLR establishes the federal tax consequences of a particular transaction before the transaction is consummated or before the taxpayer's return is filed. A PLR is issued in response to a written request submitted by a taxpayer and is binding on the IRS if the taxpayer accurately described the proposed transaction. PLRs are generally made public after all identifying information has been removed.
In addition to the above, the IRS also provides FAQs that allow them to quickly communicate information to the public on frequently asked questions and topics of general applicability. FAQs may not address a particular taxpayer's specific circumstances and are not binding on the IRS in resolving a case.
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Frequently asked questions
The IRC, or Internal Revenue Code, is the Federal tax law enacted by Congress. It is organised into subtitles, chapters, subchapters, and parts, each containing related provisions on a particular topic.
The IRC is available to the public online for free. You can find it on the U.S. Government Publishing Office website, GovInfo, or on Bloomberg Tax.
The IRC is divided into sections, which can be found in Title 26 of the United States Code (26 USC). You can browse the table of contents or use the "Jump To" feature to find a specific section.
The IRC is complex and should be read in the context of the entire Code, the Treasury Regulations, and court decisions that interpret it. Before relying on any IRC section, check that the provision is effective for the tax year you're researching.
Treasury Regulations can be found in Title 26 of the Code of Federal Regulations (26 CFR). An electronic version is available to the public from the National Archives and Records Administration (NARA) and the GPO.
