What Is the IRS? Your Rights and Obligations with the U.S. Tax Agency

If you’re planning to settle in the United States through programs such as EB-3, EB-5, or other immigration pathways, understanding the American tax system is something you simply cannot overlook. At the heart of that system is the IRS (Internal Revenue Service) — the organization responsible for collecting federal revenue, supporting taxpayers, and enforcing tax laws across the entire country. So what exactly is the IRS? What are your rights and obligations when paying taxes in the U.S.? This article from Newland USA will give you the most comprehensive and detailed look at the U.S. tax agency, along with everything any resident in America needs to know.

1. What Is the IRS and What Role Does It Play in the Federal System?

IRS stands for Internal Revenue Service — an agency under the U.S. Department of the Treasury, tasked with administering, enforcing, and overseeing the entire federal tax system in the United States. Founded in 1862 under President Abraham Lincoln to help fund the Civil War, the organization was originally called the Bureau of Internal Revenue before being renamed the Internal Revenue Service in 1953.

To better understand what the IRS is, you should know that it is far more than just a place that collects taxes. This U.S. tax agency also carries out many other important functions, including: processing hundreds of millions of tax returns each year, helping taxpayers understand and comply with the law, conducting audits to ensure accuracy in filings, managing tax credit and social welfare programs, and investigating fraud and tax evasion.

According to official data, in fiscal year 2023 alone, the IRS collected nearly $4.7 trillion and processed over 271.5 million tax returns. These figures highlight the enormous scale of the U.S. tax agency’s operations in maintaining the federal government’s budget — accounting for approximately 96% of total national revenue.

The IRS is led by the Commissioner of Internal Revenue, who is appointed by the President and confirmed by the Senate for a five-year term. This individual is responsible for reporting to the Secretary of the Treasury and representing the agency before Congress and the public. Below the Commissioner, the IRS is organized into several specialized divisions, including: the Wage and Investment division, the Small Business and Self-Employed division, the Large Business and International division, and the Tax Exempt and Government Entities division.

2. How Does the U.S. Tax System Work?

The United States uses a progressive tax system, meaning the tax rate increases as taxable income rises. This means you don’t pay the same rate on all the money you earn; instead, your income is divided into different brackets, and each bracket is taxed at its own rate.

Currently, the federal tax system has seven income tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. For example, if you are a single filer with a taxable income of $50,000 in 2025, the first portion (up to $11,925) would be taxed at 10%, the next portion (from $11,926 to $48,475) at 12%, and the remaining amount would fall into the 22% bracket. This approach is designed to be fair — people with lower incomes carry a lighter tax burden than those who earn more.

In addition to federal income tax, when paying taxes in the U.S., there are other taxes you should be aware of:

Social Security Tax: The employee contribution rate is 6.2%, matched by 6.2% from the employer, for a combined total of 12.4%. This tax funds retirement and disability benefit programs.

Medicare Tax: Both employees and employers each contribute 1.45%. High-income individuals are also subject to an additional 0.9% Medicare surtax.

State Income Tax: Depending on where you live, you may also owe taxes to your state. Some states — such as Florida, Texas, Nevada, and South Dakota — do not impose a personal state income tax, while states like California and New York have relatively high state tax rates.

Capital Gains Tax: If you sell assets such as stocks, real estate, or other investments for a profit, that gain is also subject to tax. Short-term capital gains (assets held for less than one year) are taxed at ordinary income rates, while long-term capital gains receive preferential, lower tax rates.

3. Who Is Required to Pay Taxes in the U.S.?

One of the most important principles of the American tax system is this: the obligation to pay taxes is based on tax residency status, not just citizenship. This is especially significant for immigrants and permanent residents.

Permanent Residents (Green Card Holders): The moment you receive your green card, you are considered a U.S. tax resident and must report your worldwide income to the IRS. This obligation begins on the very first day you are present in the United States as a lawful permanent resident in that year. Whether you earn income from Vietnam, any other country, or from foreign investments, all of it must be reported.

U.S. Citizens: Regardless of where in the world you live, being a U.S. citizen means you are required to file and pay federal taxes every year. This is a unique feature of the American tax system.

4. Taxpayer Rights in the U.S. — The Taxpayer Bill of Rights

When learning about what the IRS is, many people focus only on the obligations side and forget that the U.S. tax system also protects a wide range of taxpayer rights. In 2014, the IRS officially adopted the Taxpayer Bill of Rights, which outlines 10 fundamental rights:

The Right to Be Informed: You have the right to know what you need to do to comply with tax laws and to receive clear explanations of any decisions related to your tax account.

The Right to Quality Service: When interacting with the U.S. tax agency, you have the right to receive prompt, courteous, professional assistance delivered in plain, easy-to-understand language.

The Right to Pay No More than the Correct Amount of Tax: You are only required to pay the exact amount of tax owed under the law, including any applicable interest and penalties.

The Right to Challenge the IRS’s Position and Be Heard: If you disagree with an IRS decision, you have the right to raise objections and submit supporting documentation, with the expectation of receiving a fair response.

The Right to Appeal an IRS Decision: You have the right to appeal IRS decisions through an independent appellate body or to take your case to court.

The Right to Finality: You have the right to know the maximum timeframe within which the IRS may audit you or collect a tax debt, as well as when an audit has been officially concluded.

The Right to Privacy: All investigations, examinations, and enforcement actions by the U.S. tax agency must follow the law and must not intrude beyond what is necessary.

The Right to Confidentiality: Personal information you provide to the IRS will not be disclosed unless you give permission or disclosure is required by law.

The Right to Retain Representation: You are allowed to hire an attorney, accountant, or authorized representative to act on your behalf when dealing with the IRS. If you cannot afford representation, you may seek assistance from a Low Income Taxpayer Clinic.

The Right to a Fair and Just Tax System: The tax system must take into account the real-life circumstances of each individual, including their ability to pay and their capacity to provide timely information.

5. Specific Obligations When Paying Taxes in the U.S. — What You Must Follow

Alongside their rights, taxpayers in the U.S. must also fulfill the following obligations:

Annual Tax Filing: Tax residents must file a federal tax return (typically Form 1040) with the IRS each year. The filing deadline for the 2025 tax year is April 15, 2026. If you need more time, you can request a six-month extension by filing Form 4868 — but keep in mind that an extension only applies to filing, not to payment. You are still required to pay your estimated tax liability by the original due date to avoid penalties.

Reporting Worldwide Income: If you are a permanent resident or U.S. citizen, you must report all income from any source anywhere in the world — including wages earned abroad, investment returns, rental income, or pension payments from another country.

Foreign Bank Account Reporting (FBAR): If the total value of your foreign bank accounts exceeds $10,000 at any point during the year, you are required to file an FBAR (FinCEN Form 114) with the Department of the Treasury. This is a separate requirement, independent of your regular tax return.

FATCA Compliance: The Foreign Account Tax Compliance Act requires U.S. residents with foreign financial assets worth more than $50,000 to report those assets to the IRS. Failure to comply can result in penalties of up to $10,000, and if violations continue after being notified, the penalty can reach $50,000.

Quarterly Estimated Tax Payments: If you are self-employed or have sources of income that are not subject to automatic withholding (such as rental income or investment returns), you must make quarterly estimated tax payments to avoid penalties at year-end filing.

6. Consequences of Failing to Meet Your Tax Obligations

Failing to take your tax obligations seriously in the U.S. can lead to serious consequences, particularly for green card holders:

Financially, the IRS can impose a late-filing penalty of up to 5% of the unpaid tax amount per month, with a maximum of 25%. In addition, interest will accrue on any unpaid tax from the original due date.

For immigration purposes, violating tax laws can directly affect your immigration status. USCIS routinely reviews tax records when evaluating naturalization applications. If you have not filed your taxes properly, your path to citizenship may be delayed or denied. In more serious cases, criminal tax violations can lead to imprisonment, revocation of your green card, or even deportation from the United States.

7. IRS Resources You Should Know About

The IRS offers a variety of free tools and services to help taxpayers, especially newcomers to the country:

The official website IRS.gov: This is an extensive resource library featuring tax forms, filing guides, calculation tools, and frequently asked questions. You can access Publication 519 (U.S. Tax Guide for Aliens) to learn about tax obligations that apply specifically to non-citizens.

Volunteer Income Tax Assistance (VITA): This program provides free tax preparation services to qualifying individuals, including low-income earners, elderly people, and those with limited English proficiency.

Taxpayer Assistance Centers: The IRS operates offices throughout the United States where you can walk in and meet with a representative in person to get help with complex tax issues.

Taxpayer Advocate Service: If you encounter significant difficulties that cannot be resolved through normal channels, the Taxpayer Advocate Service can step in and advocate on your behalf.

IRS Free File: This program allows eligible taxpayers to prepare and file their federal tax returns online completely free of charge, through IRS-certified software.

8. The 2026 Tax Filing Season

For the 2025 tax year, the filing season officially began on January 26, 2026, and the IRS expects to receive approximately 164 million individual tax returns. The deadline to file and pay taxes is April 15, 2026. If you request an extension, you will have until October 15, 2026 to complete your filing.

One notable change: starting in September 2025, the IRS began phasing out paper refund checks. Taxpayers are encouraged to provide their bank account information to receive refunds via direct deposit — which is also the fastest way to get your money back.

The standard deduction for the 2025 tax year has also been increased, reaching $31,500 for married couples filing jointly. For 2026, this figure rises further to $32,200, reflecting the IRS’s ongoing adjustments for inflation to help ease the burden on taxpayers.

9. Key Advice for Vietnamese People Preparing to Settle in the U.S.

As a professional immigration consulting firm, Newland USA always encourages clients to learn about the U.S. tax system early — ideally during the application preparation stage, rather than waiting until after their green card arrives. Here are a few key points to keep in mind:

First, take time to understand both the federal and state tax obligations in the state where you plan to live. Each state has its own rules, and choosing the right place to live can significantly impact the total amount of taxes you owe each year.

Second, develop the habit of keeping thorough records of all income statements, receipts, and expense documents. The U.S. tax system allows for many deductions and tax credits, but you will need documentation to back them up when the tax agency asks.

Third, work with a tax professional who has experience serving international clients. U.S. tax law is highly complex, especially when it involves cross-border income, foreign assets, and tax treaties designed to prevent double taxation.

Fourth, always file your tax return on time — even if you believe you don’t owe any tax. Fulfilling your tax obligations in the U.S. not only helps you avoid penalties but also demonstrates good faith to immigration authorities, which can support your naturalization application down the road.

10. Conclusion

Understanding what the IRS is, along with your rights and obligations when paying taxes in the U.S., is an essential part of preparing for life as a resident in America. The U.S. tax agency is not merely a tax collector — it is also an organization that protects taxpayer rights through a transparent and fair legal framework. With the U.S. progressive tax system and clear rules around filing, payment, and financial reporting, equipping yourself with this knowledge will help you feel more confident as you start your new life in the United States.

Newland USA, with a team of experienced professionals and the guiding motto “Stable Settlement — Lifelong Prosperity,” is ready to advise and support you in preparing your application and walking alongside you throughout the entire EB-3 immigration process. Contact Newland USA today via hotline 0785591988 or email newsletter@newlandusa.asia for free, detailed consultation.