The total number of IRS employees at all levels comes close to 115,000, making it our largest federal bureaucracy. The examination division employs 25%, collection 15%, and criminal 3%. The other 57% make policy, run the computers, answer taxpayer inquiries and God only knows what else. There is talk on Capitol Hill of downsizing the IRS to 85,000 employees.

If you're confused about the structure of the IRS, don't worry -- you're not alone. Read the following example, which should shed some light on the relationship of the various divisions.

Example

1. On April 15, Arnold and Aimee Tyson file their income tax return by mail with their service center.

2. The information on their return is transmitted to the National Computer Center for analysis and given a potential audit score. If the score is high enough (the Tysons' is), the return is screened at the service center. If the return is then deemed to have a high enough audit potential (the Tysons' does), it is sent to their district office.

3. At the district office, the return is scrutinized again and selected for examination (audit). An IRS agent calls the Tysons or sends them an examination notice.

4. The Tysons make an appointment with a tax auditor at the local IRS office. (Or alternatively, a revenue agent comes to their business to conduct the audit.)

5. The auditor looks at the Tysons' records and suspects fraud. He refers their file to criminal investigation (a part of the district office) to be investigated by an IRS special agent. The audit is temporarily suspended. (A criminal investigation is very rare.)

6. The special agent concludes that the Tysons made many errors but they were not serious enough to be criminal acts. He sends the file back to the auditor.

7. The auditor concludes the audit and sends the Tysons an examination report. The report states that they owe the IRS additional taxes, interest and penalties. The Tysons disagree with the report.

8. The Tysons file an appeal request with their district office.

9. The appeal is heard at the regional appeals office. The appeals officer upholds the auditor and the Tysons file a petition in Tax Court. (Tax Court is independent of the IRS.) The Tysons win a partial victory in Tax Court.

10. After their Tax Court hearing, the Tysons still owe the IRS. Taxes, interest and penalties are formally entered, or assessed, in the Tysons' IRS computer records.

11. The Tysons receive their first series of computerized collection notices from their service center. They don't pay or make only a partial payment.

12. The service center eventually gives up. Next, collection notices and telephone calls come from a taxpayer service function representative.

13. The Tysons still don't pay. Their file is sent to a revenue officer who works in the collection division of the district office.

14. They try to work out some collection arrangement, but the collector is unreasonable and threatens to take their wages and property. The Tysons seek help from the problems resolution office.

15. With the help of a problems resolution officer, they arrange a payment plan with the revenue officer. Payments are sent to the service center.