Internal Revenue Service overview and functions

Internal Revenue Service is a division of the United States Government in charge of collecting the public money. This collection is generally achieved through tax payments from citizens and organizations. The formal definition offered by the website of the Internal Revenue Service is that they are "the U.S. government agency responsible for tax collection and tax law enforcement." The declared mission of the organization is to "provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all." (Website of the Internal Revenue Service, 2008).

The bases of the service were set during the Civil War, when President Lincoln and the American congress began to collect taxes from the population in order to pay off the war expenses. This also meant the necessity to create an adequate position and a service to handle these operations - Commissioner of Internal Revenue. The history of the service and the taxes it implemented is a tumultuous one, coming to a clarification only in 1913, when it was ratified through the 16th Amendment.

Today's IRS is a modern institution, created on numerous changes and struggling to adapt to the emergent modifications. Throughout the past recent years, the institution has undergone several processes of restructuring and reorganization. The measures implemented referred to changes in all approach, legislative matters, taxation, as well as internal affairs. The act that produced the most significant effects in the recent decade has been the 1998 Restructuring and Reform Act. "The IRS Restructuring and Reform Act of 1998 prompted the most comprehensive reorganization and modernization of IRS in nearly half a century. The IRS reorganized itself to closely resemble the private sector model of organizing around customers with similar needs" (Website of the Internal Revenue Service, 2008).

In order to ensure that the changes implemented by the new act would retrieve the most fruitful benefits, the institution was organized into three divisions, with their according subdivisions, as follows:

Commissioner

Commissioner, Internal Revenue

Appeals

Taxpayer Advocate Service

Equal Employment Opportunity and Diversity

Research, Analysis and Statistics

Communications and Liaison

Deputy Commissioner for Services and Enforcement

Wage and Investment Division

Large and Mid-Size Business Division

Small Business/Self-Employed Division

Tax Exempt and Government Entities Division

Criminal Investigation

Office of Professional Responsibility

Whistleblower Office

Deputy Commissioner for Operations Support

Acting Deputy Commissioner for Operations Support

Chief Technology Office

Agency-Wide Shared Services

Human Capital Office

Chief Financial Office

Office of Privacy, Information Protection and Data Security (Website of the Internal Revenue Service, 2008)

Just like any other organization, the IRS is temporarily subjected to internal and external control. The external power auditing the activities of the Internal Revenue Service is the General Accountability Office, or GAO. "The U.S. Government Accountability Office (GAO) is known as "the investigative arm of Congress" and "the congressional watchdog." GAO supports the Congress in meeting its constitutional responsibilities and helps improve the performance and accountability of the federal government for the benefit of the American people" (Website of the General Accountability Office, 2008).

Just like the IRS, the GAO works for the benefit of the American population, but just like any other governmental or non-governmental institution, it is affected by the changes occurring in the micro and macro environments. Consequently, throughout its existence, the institution has undergone several process of restructuring in order to adapt to the changes in the political economic, technological or civil societies.

A relevant example of how the General Accountability Office has adapted to the newer requirements is the integration of newer technologies and processes in their current operations. Such a newer technique is the FMIS. "The Financial Management Information System (FMIS) is an operational system that supplies the reports and data that are used for the audit of the Custodial Financial Statements of the IRS by the General Accounting Office (GAO). A major objective of the custodial Financial reporting system is to be continuously and accurately responsive to regular and ad hoc requests for custodial financial reports" (Website of the Internal Revenue Service, 2008).

The new information system has not been entirely implemented in the meaning that it still in the stages of control and testing. Once its implementation has been completed, the FMIS is expected to perform the following tasks:

Support the financial audit conducted by the General Accountability Office

Prepare the financial statements of the Internal Revenue Service

Prepare reports for trending on operational impact

Feed the BPMS (the Business Performance Management System), the CCW (Compliance Data Warehouse) and the CAP (Custodial Accounting Project)

Retrieve the information necessary for the Federal Payment Levy Program (FPLP), and finally

Analyze and report on modules with credit balances belonging to frozen credit processes (Website of the Internal Revenue Service, 2008)

The GAO is a powerful organization, with a high role in the American Congress. While their progresses through the recent years are significant, they tend to disagree in saying the same about the Internal Revenue Service. With the completion of their annual audits, the General Accountability Office has stated that the IRS is still a long way from becoming a highly organized entity. "For years, the Internal Revenue Service has had poor internal controls over financial reporting, and this past fiscal year was no exception" says an article in the CFO Magazine. Sarah Johnson, the author of this article points out other findings of the GOA relative to the IRS. A relevant one is that the governmental institution has indeed managed to register some improvements throughout the past recent years and is therefore given the adherent credit. These improvements refer mainly to dealing with the problems they were facing in terms of financial management. The efforts in this direction were concentrated to increasing the quality of the control over unpaid tax collections. Doubt still remains however on the sustainability of these improvements and the reliability and fairness of the financial statements.