Final answer:
The IRS was established during the Civil War, but not in 1682. It was created following the Internal Revenue Act of 1862 signed by President Lincoln, laying the groundwork for the modern federal income tax system after the 16th Amendment in 1913.
Step-by-step explanation:
The Internal Revenue Service (IRS) was not established by Congress on July 1, 1682; this date is incorrect. The first federal income tax was imposed in the 1860s to raise funds for the Civil War. The Union Congress enacted the nation's first income tax and raised the nation's tariff rates. In 1862, to better manage tax collection, Congress approved and President Abraham Lincoln signed the Internal Revenue Act of 1862, creating the Bureau of Internal Revenue, which is the precursor to the modern-day IRS. The Act instituted a progressive rate structure for income tax and implemented excise taxes on luxury items, though these taxes were not made permanent at that time. The 16th Amendment, which allowed Congress to levy an income tax without apportioning it among the states, was ratified in 1913. This gave the federal government a steady source of revenue and effectively authorized the income tax which is still in place today. During the Civil War, only a fraction of the war's costs were financed through taxes; the majority was covered through other means such as borrowing.