The IRS was created during the Civil War to manage the first income tax. The Revenue Act of 1862 was an emergency war measure that was based off of the income tax that Great Britain had recently implemented. The tax, and the number of people who had to pay it, increased every year of the war. By the time General Lee surrendered, 10% of all Union households had paid the tax, and it contributed 21% of the North’s war revenue.
In 1894 the income tax was revived for the first time since the Civil War. But just a year later, the Supreme Court ruled it unconstitutional because it was a direct tax, and not apportioned among the states on the basis of population, which is the only tax the Constitution originally allowed for. The 16th Amendment was ratified in 1913 to allow for direct taxation.
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