If you are considering moving to the US, living in the US, or conducting business in the US, you should be aware of the tax authority in the US – the Internal Revenue Service (IRS). Or maybe you want to move to the UK, you need to know how HMR&C works, or Australia, where Australian Taxation Office (ATO) is the tax commissioner or Canada with Canada Revenue Agency (CRA). Wherever you go, you need to know how the tax commissioners in those countries work. Chances are, you will be a tax resident in those countries.
Today, let us discuss IRS. Many people think the IRS is only for Americans, but it is important to appreciate that as long as you are dealing with any American company or person, chances are you will deal with the IRS either directly or indirectly.
For example, I have had to sign the IRS forms several times, and I do not live in America. And that is why our article today is on the IRS.
People in other countries would refer to the IRS as the revenue authority. The organisation is one of the most powerful revenue authorities in the world or government agencies in the US. Whether you are filing annual taxes, tracking a refund, or navigating a tax audit, understanding how the IRS works can save you time, money, and stress.
But what exactly does the IRS do? How does it affect your financial life? And what are the best strategies for dealing with tax issues? In this article, we will break down almost everything you need to know about the IRS, from basic tax filing to resolving disputes – all in clear, easy-to-understand language.
What is the IRS and its Role?
The Internal Revenue Service (IRS) is the U.S. government agency responsible for tax collection, enforcement, and administration of federal tax laws. Established in 1862 during the Civil War, it operates under the Department of the Treasury and plays a crucial role in funding government operations.
Key Functions of the IRS
- Tax Collection – Processes income tax, corporate tax, payroll tax, and more.
- Tax Refund – Issues tax refunds to eligible taxpayers.
- Tax Law Enforcement – Conducts audits and investigates fraud.
- Taxpayer Assistance – Provides forms, guidance, and online tools.
- Policy Implementation – Administers tax credits (EITC, Child Tax Credit) and deductions.
Operations of the IRS affect nearly every American and other global citizens – whether you are an employee, freelancer, business owner, or retiree. Let us explore how it affects you directly.
How the IRS Affects You: Taxes, Refunds, and Deadlines
1. Filing Taxes with the IRS
Every year, over 160 million taxpayers file returns with the IRS. The process involves:
- Reporting income (W-2s, 1099s, investments)
- Claiming deductions (mortgage interest, student loans, medical expenses)
- Calculating tax liability (or refund amount)
Essential IRS Tax Forms:
- Form 1040 – Standard individual tax return
- W-2 – Wage and tax statement from employers
- 1099-MISC/NEC – For freelancers and independent contractors
- Schedule C – Profit/loss for self-employed individuals
- Form 4868 – Request for a tax extension
Pro Tip: The IRS Free File program offers free tax prep software if your income is below $79,000 (2024 threshold – check for any changes). If you are not a US tax resident or citizen, you may not need to file tax returns.
2. Refund Status
If you have tax refunds with IRS, you may need to track the refund status. One of the most common taxpayer questions is, “Where is my refund?” The IRS provides a refund status tool with real-time updates.
How to Check Your Refund:
- Visit (https://www.irs.gov/refunds)
- Enter your SSN, filing status, and exact refund amount
- View your status: Received, Approved, or Sent
Refund Timeline:
- E-filed returns: 21 days (average)
- Paper returns: 6–8 weeks
- Delays? Common causes include errors, incomplete information, or identity verification.
Refer to the website for any changes.
3. IRS Tax Deadlines You Must Know
The IRS tax filing deadline is April 15, but it can shift slightly (e.g., April 17 in 2024 because of weekends). Always check for communication about any deadline changes.
Key Deadlines:
- April 15 – Individual tax returns due
- October 15 – Final deadline if you filed an extension
- June 15 – Deadline for U.S. citizens living abroad
- Estimated tax payments – Due quarterly (April, June, September, January)
What if You Miss the Deadline?
You will incur extra tax charges.
- Late filing penalty: 5% per month (up to 25%)
- Late payment penalty: 0.5% per month
- Solution: File ASAP, even if you cannot pay in full (payment plans are available).
Always refer to the website for any changes.
Common IRS Issues (And How to Solve Them)
You may experience issues with the IRS. It is important to know how to resolve those issues. There are many problems that you may face from the IRS. The following are some of those problems.
1. IRS Audits: What Triggers Them & How to Respond
Only about 1% of taxpayers face an IRS tax audit in their lifetime, but it is essential to always be prepared.
Top Audit Triggers:
- High income ($500K+ increases audit risk)
- Unreported income (missing 1099s or W-2s)
- Excessive deductions (home office, charity, business expenses)
- Cryptocurrency transactions (IRS now tracks crypto via Form 8949)
How to Handle an IRS Audit:
- Do not panic – many tax audits are simple document requests.
- Gather records and documents (bank statements, receipts, invoices, etc.).
- Respond on time (usually 30 days).
- Consult a tax professional for complex cases.
2. IRS Payment Plans: Cannot Pay Your Tax Bills Immediately
If you owe the IRS but cannot pay immediately, you have options:
Types of IRS Payment Plans:
- Short-term (120 days) – No fee, but interest applies.
- Long-term (installment agreement) – For debts up to $50,000.
- Offer in Compromise (OIC) – Settle for less than owed (if eligible).
Always consult the IRS website for other options.
How to Apply:
- Online (via IRS Payment Agreement tool)
- By phone (800-829-1040)
- By mail (Form 9465)
Warning: Ignoring tax debt leads to liens on your properties, levies, or wage garnishment.
3. IRS Scams: How to Spot & Avoid Them
Scammers often impersonate the IRS via phone, email, or text. Many people have lost money to the scammers. You should be careful when dealing with people claiming they are calling from the IRS.
Red Flag it is an IRS Scam:
- “Urgent” demands for payment via gift cards, wire transfers, or Bitcoin.
- Threats of arrest, deportation, or license suspension.
- Fake caller ID showing “IRS” (spoofing).
Real IRS Communication Methods:
- Official letters (via USPS, not email/text).
- Secure messages in your IRS online account.
- Never request payment via prepaid cards or crypto.
Report scams to: [Treasury Inspector General](https://www.tigta.gov) or (https://www.irs.gov/phishing).
IRS Tools & Resources to Simplify Taxes
The IRS offers free tools to make tax filing easier. The following are some of those tools.
1. IRS Free File Program
a. Free tax software (for incomes ≤ $79,000).
b. Partners include TurboTax, H&R Block, Tax Act.
c. Guided filing for federal & some state returns.
2. IRS Tax Withholding Estimator
a. Helps adjust W-4 withholdings to avoid surprises.
b. Ideal after major life changes (marriage, kids, new job).
3. IRS Direct Pay
a. Free, secure way to pay taxes from your bank account.
b. No fees, instant confirmation.
4. IRS Online Account
a. View tax records, payment history, and notices.
b. Make payments, set up plans, and access transcripts.
c. Free tax software (for incomes ≤ $79,000).
Final Thoughts: Mastering Your IRS Obligations
Navigating the IRS does not have to be overwhelming. By understanding deadlines, using free tools, and knowing your rights, you can handle taxes confidently and efficiently.
Key Takeaways:
- The IRS collects taxes, processes refunds, and enforces laws.
- File on time (April 15) or request an extension (October 15).
- Track refunds via IRS.gov/refunds.
- Audits are rare; keep records and documents and respond promptly.
- Cannot pay? Set up a payment plan to avoid penalties.
- Avoid scams, the IRS never calls demanding immediate payment.
Need More Help?
- IRS Helpline: 800-829-1040
- Local Tax Clinics: [IRS Free Tax Help](https://www.irs.gov/individuals/free-tax-return-preparation-for-you-by-volunteers)
By staying informed and pro-active, you can minimize stress and maximize refunds when dealing with the IRS!
Be prepared before you migrate to US –
