Question

Discuss the role of the IRS and the Treasury Department in the income tax process. Explain how tax laws are created and enforced.

Answer 1

A. The role of the IRS and Treasury Department in the implementation of the Income-tax legislation may be highlighted as follows:

The role of the IRS in the income tax process may be illustrated as follows:

Audit and tax return processing:
One of the major functions of the IRS is to assess whether taxes are due from taxpayers which would lead to procedures for assessment and tax collection.

Tax collection:
The IRS has a major role in the collection of taxes as assessed for the financial year.

Appeals:
If a taxpayer files a petition against the collection of outstanding tax liabilities, then the IRS has to look into such matters as well.

Criminal/fraud investigation:
The IRS has to look into cases involving tax misinterpretations or fraud as well.

The functions of the US Department of Treasury may be highlighted as under:

• The collection of taxes, duties, and monies paid to and due to the U.S. as well as payments concerning bills of the U.S.
• The enforcement of federal finance and tax laws;
• Advisory role on monetary, economic, trade, and tax policies.

B. As per the US Department of Treasury website, the procedure of enacting tax laws and enforcing them involves the following steps:

The tax legislation process is enacted as a 'Bill' and introduced in the House of Representatives, where it has to be approved and sent to the President for his assent, whereupon it becomes a law.

1. The Ways and Means Committee is responsible for all tax legislation. The tax bill originates in the House of Representatives and referred to the Committee which, after reasonable consideration, prepares a comprehensive report on the proposed legislation, citing the reasons for the recommendation of the Bill, and reaches a tentative decision on the proposal.

2. Once the bill and the report are completed, they are passed onto the full House for amendment, consideration, and approval.

3. The Senate Finance Committee has its responsibilities to review the Bill and rewrite the proposal, if necessary before it is presented to the full Senate. A report gets filed along with the bill which lays down the amendments made by the Finance Committee.

4. If the Senate approves the House version of the bill, without amendments, it is sent directly to the President.

5. However, in case of amendments, the bill with the Senate amendments gets returned to the House of Representatives. If the House passes a motion to disagree with the Senate amendments, usually a Conference Committee is appointed to work on creating a compromise version.

5. The compromise version is sent to the House and Senate for approval.

6. It is worth noting that the President receives advice from the Secretary of the Treasury and other Federal agencies on the provisions of the Bill before he/she decides to sign or veto the Bill.

7. If he decides to veto the bill, the same gets returned to the House along with the reasons as to why the various provisions of the Bill were opposed. The House must then attempt to override the veto or make those changes that the President wants.

8. If the President signs the bill, the responsible agencies such as the US Department of Treasury and IRS have to initiate action to implement the provisions of the Bill.

The Treasury Department issue the necessary regulations, while the Internal Revenue Service develops tax forms and instruction booklets for taxpayers.

Sources:

https://home.treasury.gov/about/general-information/role-of-the-treasury
https://www.treasury.gov/resource-center/faqs/Taxes/Pages/writing.aspx
https://www.taxpolicycenter.org/briefing-book/what-does-irs-do-and-how-can-it-be-improved