One of the most important – and most despised – Federal institutions in the United States has to be the Internal Revenue Service (IRS). With origins dating back to the Civil War, the IRS is charged with tracking and collecting the money needed to run the government. It is the largest accounting and records keeping organization in the world.

In fact, the tax collecting agency has been around longer than the current system of federal taxation. Congress created the Commissioner of Internal Revenue in 1862 to oversee and collect the first income taxes used to finance the Civil War. After the war the tax was abolished but the agency remained.

Bureau of Internal Revenue

With the ratification of the 16th Amendment to the Constitution in 1913, which established a permanent federal income tax, the agency's name was the Bureau of Internal Revenue. That was the same year that the first Form 1040 was introduced by which taxpayers reported their income. At that time, income tax was levied at a rate of 1 percent for people with incomes of more than $3,000, with a 6 percent surtax added for incomes of more than $500,000.

This was the beginning of an up and down trend in income tax rates, all overseen by
the bureau. The highest income tax bracket rose to 77 percent in 1918 in order to finance America's efforts in World War I, but that dropped back to only 24 percent in 1929. Tax rates again rose during the 1930s in the Great Depression to offset lost revenues (but also served to further weaken the economy).

Today's IRS

The IRS the public knows today began to take shape in 1953 when the bureau's name was changed to the Internal Revenue Service. It also was during that period that the politically appointed workers at the agency were replaced by career professionals. Today, only the IRS commissioner and its chief counsel are chosen by the president and confirmed by Congress.

It was also during this period that the IRS grew rapidly in scope and size. Its power and influence grew as did concerns that it had acquired too much power. Some well publicized abuses by the agency prompted Congress to undertake a reorganization of the IRS in 1998. At that time the agency was divided into four operating divisions, each focusing on different types of taxpayers.

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