The Stranger Side of the Internal Revenue Service (IRS)

January 19, 2023

The Internal Revenue Building of the IRS in Manhattan on March 8,2013 as seen from the public sidewalk.

The United States tax code is known for being confusing, and the workings of the entity that collects all those taxes, the Internal Revenue Service (IRS), can be just as complicated. Here are some facts, and other strange things, about the tax-collecting arm of the U.S. Government.

Missing Children

In 1987, the IRS required that the Social Security numbers for children ages five and over who were claimed as dependents had to be listed on tax returns. The year before, taxpayers only had to list the names of children they were claiming.

Seventy-seven million dependents had been listed on tax returns in 1986, but after the law changed in 1987, only 70 million children were listed. Somehow 7 million children had been lost along the way in that one year. It became apparent that people had very active imaginations before 1987 about who actually lived with them. Source

Nothing Will Stop the Collection of Taxes

As outlined in the Internal Revenue Manual of the IRS, a thermonuclear bomb, nuclear war, or some other disaster won’t stop the collection of taxes. A section titled “National Emergency Operations” of the manual has instructions on how taxes would be collected if a catastrophic event were to happen.

According to the manual, the IRS would resume the collection of taxes within 30 days of an emergency, and the collection of current taxes would be the primary duty of employees since the collection of delinquent taxes would be more difficult because of a disaster. Source

Kidnapping Rules?

The IRS has guidelines and rules for people if their child is kidnapped. The rules cover how the child can be claimed as a dependent and how the taxpayer can claim to be the head of the household on their tax return. Some of the rules include how long the child was living with the person before and after they were kidnapped.

The child has to have lived with the person more than half of the year before or after the kidnapping and presumed to be kidnapped by someone other than a member of the child’s family. Source

Short But Sweet

According to IRS Publication 525, Taxable and Nontaxable Income, a person who receives a bribe must report it on their tax return. The publication states, “If you receive a bribe, include it in your income.” That’s it. Source

You’re Supposed to Declare Any Income

The IRS has strict rules on what should be declared as income on a tax return, even if it is obtained illegally. Income from dealing illegal drugs or from robbing a bank is supposed to be declared on an income tax form. The IRS can’t give a tax return to a law enforcement agency without a court order, but they can provide information on pieces of a tax return if it is undergoing an audit. Source

About the Only Thing the IRS Will Let You Get Away With

Penalties, fees, and interest are accrued if a taxpayer files their return after the tax filing deadline if they owe taxes. These penalties can be avoided if the taxpayer files an extension, but even then, the person has to have had paid at least 90 percent of the taxes they owe. There is one exception. If a taxpayer is due a refund by the IRS, there is no penalty for filing a late tax return. You can probably figure out why. Source

The Tax Gap

The tax gap is the difference between what is legally owed to the government and what is collected by the IRS. For the years between 2008 to 2010, the IRS estimated the tax gap to be $458 billion. The voluntary compliance rate, or how much people pay their tax obligations voluntarily and without enforcement, was 81.7 percent for those years. Source

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Things That Won’t Hold Up in Court

The U.S. Government has successfully defended against many tax arguments where individuals were trying to get out of paying taxes. The courts have struck down such things like the argument that filing a tax return or paying taxes is voluntary, or that the IRS must file for someone who fails to file.

Other things dealing with income such as only foreign-source income is taxable, wages and tips are not income, and that military retirement pay isn’t income, have also been defeated. In other cases, people argued that a taxpayer is not a citizen of the United States but of a state and therefore cannot be taxed, and a taxpayer is not a person as defined by the tax code.

Some of these plaintiffs were met with not only the case being dismissed but also with penalties and sanctions for making a frivolous (and often used) argument to the court. Source

An Old Computer System

The IRS used a computer system that is about 58 years old for gathering taxpayer information and giving out refunds. An application called the Individual Master File is written in the Assembly programming language and has around 1 billion taxpayer accounts on it. There aren’t even that many programmers who understand the computer code of the system anymore because of its age. Source

A Tax That Stuck Around

A tax was imposed on long-distance phone service to pay for the Spanish-American war in 1898. The war ended four months after the tax was imposed, but the tax remained for over 100 years. In May 2006, it was announced by the IRS that it would finally discontinue this 3 percent tax on long-distance service. Source


Whistleblower Awards

The IRS offers an award through its Whistleblower Office for those people who provide information on persons who fail to pay the tax they owe. The award can go to anyone, and there are two types of awards.

If the taxes, penalties, and interest of the amount owed that the person who had the whistle blown on them exceeds $2 million, the whistleblower could receive 15 to 30 percent of the amount collected. The taxpayer in question has to have an annual gross income of $200,000 or more for the whistleblower to get this award.

The other award is for other cases that don’t meet the $2 million threshold, or the taxpayer makes less than $200,000. This reward goes up to 15 percent of the amount collected to a maximum award of $10 million. Source

Too Much Money to Process

The IRS has to use a special computer to handle Bill Gates’ tax return because the numbers are too large. Gate’s said at a conference in Lisbon, Portugal, in 2006, that he would get notices about unpaid taxes from the IRS only later to receive another notice that it was a mistake and that his information was on another computer. Source


The roots of the IRS can be traced back to 1862 when President Abraham Lincoln enacted the income tax to pay for expenses from the Civil War and created the position of commissioner of Internal Revenue. In 1872, the income tax was repealed. The time without an income tax for American citizens lasted until 1894 when Congress brought back the income tax, but it was ruled unconstitutional by the U.S. Supreme Court the next year.

Things changed for good when the 16th amendment was passed by a three-quarter state majority in 1913, which gave Congress the authority to implement an income tax. The first tax rate was 1 percent for those who made $3,000 and above and a 6 percent rate on income over $500,000.

In the 1950s, the name of the tax-collecting branch of the government changed from the Bureau of Internal Revenue to the Internal Revenue Service. Source

Not So Much About the IRS: Help for Willie

Country singer Willie Nelson got hit with a tax bill in 1990 for $16.7 million for back taxes. He had to sell many of his possessions to stay out of trouble, but his fans came to his rescue after he released an album titled The IRS Tapes: Who Will Buy My Memories. They bought many of Nelson’s previous possessions at auction and then returned the items to him. Nelson was able to pay off his bill by 1993. Source

About the author 

Daniel Ganninger - The writer, editor, and chief lackey of Knowledge Stew, the author of the Knowledge Stew line of trivia books, and editor of Fact World and the Knowledge Stew sister site on Medium, our ad-free subscription sites. I hope you learn many new things here that add to your knowledge.

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