Buzz
The April 15 deadline has come and gone. Those who filed their taxes can now relax as they await any refunds, while those who haven’t filed yet and missed the extension request may face interest and penalties from the IRS.
But there's more to the IRS than just tax collection. They have some rather surprising practices. As you'll soon discover, this agency is much more intriguing than it seems.
10. The IRS Relies on Old Computers to Handle Your Tax Returns
The IRS manages a significant portion of the U.S. government's revenue. It's quite surprising that the computers it uses to process our taxes are so outdated. These machines, which date back to the 1950s, still rely on magnetic tapes to store data.
Decades ago, Americans filed their taxes by hand, which made it a labor-intensive task for the IRS staff to check for fraud and mistakes. This changed in the 1950s when the IRS partnered with IBM to develop the Individual Master File (IMF) software to streamline the tax process.
The IMF software could automatically spot discrepancies between the incomes reported by employers and those claimed by employees. It also compared current and past tax payments to uncover tax evaders. If that wasn’t enough, it would automatically send out letters to taxpayers suspected of underreporting their income.
However, the IMF system is outdated. It was written in assembly language, which is no longer commonly used. In fact, the IRS faces increasing difficulty recruiting programmers to maintain the code. The IRS has considered replacing the IMF with the Customer Account Data Engine, but has not yet done so.
9. The IRS Only Provides One-Year Deductions and Credits for Kidnapped Children
For the 2018 tax year, the IRS raised the standard deduction and eliminated personal exemption deductions for dependents, such as children. However, before this change, the IRS had detailed tax exemption rules for parents of kidnapped children.
The IRS only permitted tax deductions for a child abducted by someone outside the family. The child had to have lived with the parent or guardian claiming the deduction for at least half of the year in which the kidnapping occurred. (For the 2018 tax year, this rule still applies for those claiming an earned income tax credit.)
The parent or guardian was only eligible for a personal exemption deduction for the kidnapped child for the remainder of the year, not a day beyond that. The IRS ruled out deductions after the year of the abduction since parents could only claim personal exemptions if they provided half of the child's support.
Interestingly, the kidnapper, even if they were a family member, could not legally claim a tax deduction for the child's care, as the abduction made the custody illegal.
8. The IRS Made Seven Million American Children Disappear in 1987
The IRS didn't always require parents to provide the social security numbers of their children on tax returns. Many parents took advantage of this loophole by listing non-existent children as dependents. It was nearly impossible for the IRS to detect or verify whether these children actually existed.
This changed in 1987 when the IRS mandated that parents list the social security numbers of any dependents who were at least five years old. The rule came into effect in 1987, when U.S. parents listed 70 million children as dependents. Interestingly, a year earlier, they had listed 77 million children. What happened to those seven million children?
7. The Church of Scientology Allegedly Blackmailed the IRS to Gain Tax-Exempt Status
The Church of Scientology does not pay taxes to the U.S. government despite having profitable sources of income. The IRS reported that the church earned $300 million annually in the early 1990s, and it is likely making much more now.
Interestingly, the Church of Scientology paid taxes to the U.S. government for 25 years until the IRS unexpectedly granted it tax-free status in October 1993. Prior to this, the IRS and the church had been involved in a lengthy legal battle over the church’s tax classification.
The church argued that it was not a taxable entity because it was a religious organization. Meanwhile, the IRS insisted that it was a business, subject to tax. Despite this, the church continued paying taxes, as every court had ruled it a business—until the IRS reversed its position in 1993. The reasons behind this sudden change remain undisclosed.
It was later revealed that the Church of Scientology allegedly gained tax-exempt status after launching a sophisticated blackmail scheme against key IRS officials. The church reportedly hired private investigators to gather compromising information about IRS staff and their businesses. It may have also covertly funded anti-IRS groups.
In 1991, David Miscavige, the church leader, met with Fred T. Goldberg Jr., then the IRS commissioner, and proposed dropping several lawsuits against the IRS in exchange for tax-exempt status. However, both Goldberg and Miscavige have never confirmed this account.
The church claimed that the meeting was unplanned and denied any involvement of private investigators. The IRS still refused to disclose details of the meeting, even after The New York Times filed a Freedom of Information Act request.
6. The IRS Has An Elaborate Plan To Resume Tax Collection A Month After A Nuclear War
The IRS is so hell-bent on collecting taxes from US citizens, residents, and businesses that it has even outlined how to do so after a nuclear Armageddon. As reported in 1989, the IRS updated its employee manual with information detailing the agency’s response to a nuclear war.
This was during the Cold War, so the fear of a nuclear apocalypse was somewhat understandable. According to the manual, the IRS will resume tax collection within 30 days of a nuclear attack. Considering the chaos, every staff member will focus on this important job despite their position.
Tax collection efforts will be concentrated on areas that produce the most taxes. The manual also mentioned that staff will focus on collecting current taxes because the widespread destruction could make it challenging to recover previously owed taxes.
5. A Commissioner Of The IRS Was Convicted For Tax Fraud
The IRS commissioner is the head of the agency and is expected to be the epitome of integrity when it comes to tax matters. However, this was not the case for Joseph D. Nunan Jr., who served as the IRS commissioner from 1944 to 1947. He was sentenced to five years in prison and fined $15,000 for tax fraud.
Nunan’s troubles began in March 1933, when he withdrew substantial sums of money from his bank, fearing the bank would collapse, and kept the money at home. This cash was untraceable. Later, when he made deposits in other banks, it was unclear whether he was depositing new income or previously withdrawn funds. In 1948, he also won a $1,800 bet after correctly predicting that Harry S. Truman would defeat Thomas E. Dewey in that year's presidential election.
On his tax returns from 1946 to 1950, Nunan concealed a series of legal fees he earned through his firm. He neither reported nor paid taxes on this income. The IRS concluded that he had evaded $90,000 in taxes over a five-year period.
After being exposed, Nunan made desperate attempts to avoid prison. He claimed the funds were nontaxable, even though they were clearly taxable. He also denied being an expert in tax matters, despite his position, and argued that he had only been appointed to the IRS job due to political connections.
4. The IRS Taxes Proceeds From Crime
The IRS mandates that US citizens, residents, and businesses pay taxes on income derived from criminal activities. This includes bribes, kickbacks, and money made through illegal activities like theft or the sale of illegal drugs. Such earnings are considered taxable income.
The IRS also requires criminals who steal nonmonetary items to pay taxes based on the 'fair market value' of the stolen goods. Thieves are exempt from paying this tax only if they return the stolen items to the rightful owner within the same year.
Normally, taxing illegal income would violate the Fifth Amendment, which protects criminals from self-incrimination. However, the IRS has a workaround. Criminals can pay their taxes without disclosing the source of their income. For example, a drug dealer could simply claim to be 'self-employed.'
3. The IRS Has An Entire Page Dedicated To Tax Quotes
The IRS has an entire page on its website dedicated to sharing tax-related quotes. These quotes appear to be aimed at motivating individuals to pay their taxes.
Among the featured quotes are ones like 'Taxes are what we pay for civilized society' by Justice Oliver Wendell Holmes Jr., 'The power of taxing people and their property is essential to the very existence of government' by President James Madison, and 'Like mothers, taxes are often misunderstood, but seldom forgotten' by Lord Bramwell.
There are also some humorous tax quotes, such as 'I am proud to be paying taxes in the United States. The only thing is—I could be just as proud for half the money' by Arthur Godfrey, 'Few of us ever test our powers of deduction, except when filling out an income tax form' by Laurence J. Peter, and 'Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund' by F.J. Raymond.
Other notable tax quotes include 'People who complain about taxes can be divided into two classes: men and women' by an unknown author, 'The best measure of a man’s honesty isn’t his income tax return. It’s the zero adjust on his bathroom scale' by Arthur C. Clarke, and 'Income tax has made more liars out of the American people than golf' by Will Rogers.
However, for some reason, the IRS left out one of the most famous tax quotes of all: 'In this world, nothing can be said to be certain, except death and taxes' by Benjamin Franklin.
The IRS keeps a record of individuals who are known for violent behavior towards the agency.
Not everyone is pleased with paying taxes. Some citizens actively resist these payments and may resort to violence when the IRS attempts to collect. In the 1970s, a surge in violence against IRS agents occurred, with radical groups opposed to taxation targeting IRS staff and offices in what would be classified as acts of terrorism.
Opponents of taxes have attacked or even kidnapped IRS agents. In some cases, individuals who owe taxes have hired hitmen to eliminate IRS staff members. Others have driven vehicles into IRS offices or attempted to blow them up or set them on fire, though these efforts have largely failed.
In 1991, the IRS provided a list of individuals it deemed 'potentially dangerous taxpayers' to law enforcement agencies. However, attacks on the IRS continued despite this precaution.
The most tragic and extreme attack occurred in 2010, when Joe Stack deliberately crashed his plane into the IRS office in Austin, Texas. Both Stack and an IRS agent lost their lives, while thirteen other individuals were injured. This marked the deadliest assault on the IRS.
1. The IRS Operates an Armed Division
The IRS Criminal Investigation Division serves as the agency's armed branch. The individuals working in this division are referred to as “special agents,” a designation shared with FBI agents. These agents are equipped with an extensive array of weapons, including machine guns.
By 2017, it was reported that the IRS Criminal Investigation Division held 4,487 firearms and over five million rounds of ammunition. The agency maintains this stockpile solely to arm agents when executing search warrants and apprehending individuals suspected of tax evasion.
It appears that IRS special agents don't frequently have to use their weapons. Between 2009 and 2011, investigations revealed that the agents accidentally discharged their firearms 11 times, a number that actually surpassed the instances in which they fired intentionally.
