There are four divisions handling the tax returns:
- Wage and Investment Income Division
- Small Business and Self Employed Division
- Large and Mid Size Division
- Tax Exempt and Government Entities Division
Wage and Income Division
This department handles about 90 million returns representing about 115 million people. The IRS receives the information from third parties such as employers who report the wages they paid their employees for the year. They report all W-2’s. Also banks and investment firms report interest and dividends income paid to individuals to this division.
The thrust of the IRS effort from a compliance point of view is to ascertain that the individuals have claimed the correct number of exemptions, that filing status is correct, and credits and deductions are properly claimed. As for wages and investment income the fact that third parties supply the income makes the compliance for those items not the focus of the department. Any omission of the wages and investment interest will be identified and the IRS will usually issue a CP 2000 for underreporting of income.
This Division is headed by a Deputy Commissioner rank and is divided into three areas:
- Compliance section ascertaining the correct tax calculated on the returns as well as collecting the tax on those tax returns.
- Information area which supplies information about the returns such as taxpayer’s transcripts and assistance in filing the tax return.
- Education of tax return filers to ensure that taxpayers will file the correct tax return.
This division will also conduct tax audits for simple returns. There are eight IRS centers dedicated to process individual tax returns. Five of those centers are devoted to wage and investment income.
Wage and Investment centers are Andover, Atlanta, Austin, Fresno, and Kansas City. The other three centers for individual returns are Brookhaven, Memphis and Philadelphia centers.
Small Business and Self-Employed Division
Self-employed division handles 45 million filers. It handles more complicated issues than the wage and investment income division. While the IRS says the average contact with a wage filer is about 4 times a year, the average contact per self employed can be as much as 60 times per year. Cincinnati and Ogden centers are in charge of self employed returns and payroll reports (such as 941 and 940).
Large and Mid-Size Corporations
This division is divided based on the type of industry as followed:
- Financial Service and Health Care (Manhattan)
- Rental, Food and Pharmaceuticals (Chicago)
- Natural Resources (Houston)
- Technology and Media (San Francisco)
- Heavy Manufacturing, Construction and Transportation (New Jersey)
Tax Exempt and Government Entities
The branches conduct field audits through its agents in the area of income unemployment, gift and estate taxes among others. These branches also are responsible for offer in compromise when the basis of the offer is doubt to the liability or the inability to pay the tax debt.
One may wonder as to where the distinct offices fit in the scheme of the branches based on the type of returns as far as tax audit is concerned. Local offices operate as if they were the functional extensions of the branches regarding the audits.
The area offices are in charge of tax return classifications, tax return reviews and field and office examination. They conduct office audits through correspondence and interviews and also provide technical support year-round.