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That same year, the first edition of the 1040 form was introduced. Though the constitutional amendment to allow the federal government to collect income taxes was proposed by President Taft in 1909, the 16th Amendment was not ratified until 1913, just before the start of the First World War. Connecticut, Rhode Island, and Utah rejected the amendment Pennsylvania, Virginia, and Florida did not take up the issue. Of the 48 states at the time, 42 ratified it. It was further ratified by six more states by March. By February 1913, 36 states had ratified the change to the Constitution. This granted Congress the specific power to impose an income tax without regard to apportionment among the states by population. The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration. This movement culminated during then-candidate Woodrow Wilson's election of 1912 and in February 1913, the ratification of the Sixteenth Amendment to the United States Constitution: In 1906, with the election of President Theodore Roosevelt, and later his successor William Howard Taft, the United States saw a populist movement for tax reform. The federal government scrambled to raise money. Farmers' Loan & Trust Co., a decision that contradicted Hylton v. Income taxes evolved, but in 1894 the Supreme Court declared the Income Tax of 1894 unconstitutional in Pollock v. However, in 1872, seven years after the war, lawmakers allowed the temporary Civil War income tax to expire. Post Civil War, Reconstruction, and popular tax reform (1866–1913) Īfter the Civil War, Reconstruction, railroads, and transforming the North and South war machines towards peacetime required public funding.

In 1862 the rate was 3% on income between $600 and $10,000, and 5% on income over $10,000.īy the end of the war, 10% of Union households had paid some form of income tax, and the Union raised 21% of its war revenue through income taxes.

The initial rate was 3% on income over $800, which exempted most wage-earners.

It copied a relatively new British system of income taxation, instead of trade and property taxation. The Revenue Act of 1862 was passed as an emergency and temporary war-time tax. In July 1862, during the American Civil War, President Abraham Lincoln and Congress passed the Revenue Act of 1862, creating the office of Commissioner of Internal Revenue and enacting a temporary income tax to pay war expenses. Boutwell was the first Commissioner of Internal Revenue under President Abraham Lincoln. Nevertheless, during the 2017 fiscal year, the agency processed more than 245 million tax returns. As of 2018, it saw a 15 percent reduction in its workforce, including a decline of more than 25 percent of its enforcement staff. In recent years the agency has struggled with budget cuts and reduced morale. Since its establishment, the IRS has been responsible for collecting most of the revenue needed to fund the federal government, albeit while facing periodic controversy and opposition over its methods, constitutionality, and the principle of taxation generally.

In 1953, the agency was renamed the Internal Revenue Service, and in subsequent decades underwent numerous reforms and reorganizations, most significantly in the 1990s.

Constitution was ratified, authorizing Congress to impose a tax on income and leading to the creation of the Bureau of Internal Revenue. In 1913, the Sixteenth Amendment to the U.S. The temporary measure funded over a fifth of the Union's war expenses before being allowed to expire a decade later. The IRS originates from the Commissioner of Internal Revenue, a federal office created in 1862 to assess the nation's first income tax to fund the American Civil War. IRS location sign on Constitution Avenue, Washington, D.C.