What is the IRS?
The Internal Revenue Service (IRS) is the bureau of the U.S. Department of the Treasury responsible for administering and enforcing the Internal Revenue Code. The IRS collects federal income, employment and excise taxes; processes returns; conducts audits and examinations; and issues guidance (Revenue Rulings, Revenue Procedures, Notices and Private Letter Rulings) interpreting U.S. tax law.
Who deals with the IRS?
U.S. citizens, U.S. tax residents, U.S. domestic entities, and foreign persons with U.S.-source income or a U.S. trade or business all interact with the IRS. Non-U.S. companies are most commonly exposed through withholding tax obligations on payments to U.S. recipients, FATCA reporting, IRS Form W-8 documentation, and treaty-benefit claims under bilateral income-tax treaties.
Key filings and identifiers
Common IRS interactions include obtaining an EIN (employer identification number) for a U.S. entity or withholding agent, an ITIN for foreign individuals not eligible for an SSN, filing Form 1040/1120/1065 income-tax returns, Form 1042/1042-S for withholding on non-U.S. persons, and FATCA Form 8966 for foreign financial institutions.
Enforcement powers
The IRS conducts examinations (audits), proposes adjustments via Notices of Deficiency, assesses penalties and interest, and can pursue collection through liens, levies and offsets. Disputes are resolved through IRS Appeals or litigation in the U.S. Tax Court, federal district courts or the Court of Federal Claims.
Why the IRS matters for cross-border deals
Cross-border M&A, financing and tech transactions routinely require IRS analysis: check-the-box entity classification, FIRPTA on U.S. real-estate gains, Subpart F and GILTI for U.S. shareholders of CFCs, and withholding mechanics for royalties, dividends and interest paid to non-U.S. recipients.