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1. The Beginning
The ongoing Civil War raised concern in President Lincoln’s mind about funding. Congress and Lincoln set out to find a way to finance the army and union ranks. In 1867, an Office of the Commissioner of Internal Revenue was created, to head up the Bureau of Internal Revenue. In addition to creating the Bureau, the legislation allowed for certain taxes to fund the war.
2. The 16th Amendment
In 1913 the 16th amendment gave Congress the right to enact the first income tax. The same year, the very first 1040 form was created and shown to Congress, with a tax rate of 6% levied on persons with incomes of $500,000 or more.
3. World War I
In 1918, World War I took an expensive turn and the Government sought a simple and safe way to fund their efforts. The income tax was increased to 77% to fund the war. Then, the tax dropped in the years following the way, only to rise again during the great depression. Over time, income taxes have been a way to fund expensive war efforts and economic crises.
4. Name Change
After the Reorganization Act of 1949, The Bureau of Internal Revenue began to change their overall structure. All jobs under the Commissioner were made into civil jobs, and new professionals were hired. In 1953, the most noticeable change was made when the Bureau of Internal Revenue changed their name to the Internal Revenue Service (IRS), as it remains today.
5. Major Revisions
The most recent major revisions to the IRS occurred in 1995. Economists and politicians alike began to notice how outdated the system truly was. A commission was instituted to reevaluate the IRS, and in June of 1997 they issued their report. Major changes were made, from the updating to new paperless options of filing taxes to the simplification of tax laws and clarification of taxpayer rights.
6. Outsourcing Collection
In September of 2006, the IRS made the decision to outsource taxpayer debt collection to private debt collecting agencies. There was resistance and negative response to the decision, as people were worried the high wages the agencies were being given would cause them to use unfair, pressuring tactics. However, the IRS refused to revoke their decision.
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