To effectively deal with the IRS, you should have a basic understanding of how the agency is structured.

The IRS operates on four primary levels. The divisions within the various levels can have similar names, which makes dealing with the IRS more confusing than it should be.

National

The IRS is a branch of the U.S. Treasury Department, with headquarters in Washington, D.C., and is ruled by a commissioner appointed by the President. Regional commissioners and district directors, also political appointees, oversee IRS operations. The IRS "brain" is contained in the National Computer Center. The National IRS office sets tone and policy, while procedures (especially collection procedures) are left to the ten regional service centers and the 33 district offices. There are also numerous suboffices under the district offices.

The IRS is divided into nine departments, but the only one that affects you directly is Compliance, which has five divisions -- Examinations, Appeals, Collections, Criminal Investigation and International Operations.

Service Centers

Service centers process annually about 200 million tax returns, more than half of which are individual income tax returns. Service centers collect over one trillion dollars in tax payments each year from 125 million taxpayers and seven million organizations. The centers are located in Andover, Atlanta, Austin, Cincinnati, Fresno, Holtsville, Kansas City, Memphis, Ogden and Philadelphia. Each center has its own computer that endlessly mails out tax notices -- collection notices (bills), audit notices and tax forms. Any tax bill dispute you have with the IRS probably originated here. Contacts with the service center are usually by mail, or occasionally by telephone.

Taxpayer Service Function

This program was developed in the 1980s to facilitate communication with taxpayers who owe money to the IRS. It is a highly computerized regional information and tax collection system staffed by personnel working by phone and mail.

District Offices

The U.S. is divided into 33 IRS districts, each headed by a district director. These offices sit in major cities with suboffices in smaller cities. You can bet one is near you. In the IRS organization, each district office falls under a service center. They provide each other with information, although their sharing scheme is less than perfect and often contains glitches. If you ever meet with someone from the IRS, that person will most likely work out of a suboffice of a district office.

Each district office contains several divisions, four of which you may encounter -- examination, collection, criminal investigation and problems resolution.

Let's look at the four IRS district divisions in more detail.

• Examination division conducts audits ("examinations" in IRS-speak). The people who audit tax returns are called tax auditors if you meet them at a district office or revenue agents if they come to your home or business. The term auditors is generally used to refer to both.
• Collection division collects tax dollars. Local IRS collectors are called revenue officers. If your case goes to collection, you or your representative will meet with a collector face-to-face. The service center and taxpayer service function are also part of the collection apparatus, but they do not employ revenue officers.
• Criminal investigation is the police force of the IRS, and its employees are called special agents. They work out of district offices and service centers. Chances are slight that you will ever meet an IRS criminal investigator. If you do, it means that you or someone you know is under investigation for a tax crime.
• Problems Resolution Program (PRP) employs the IRS troubleshooters -- called problems resolution officers or PROs -- to call on when you can't get tax problems solved through normal IRS channels. These officers are found at service centers and regional and district offices. PROs hold powers to cut through red tape and get things done quickly.