In that year, Congress enabled contracts between private citizens and the Treasury Department to collect delinquent taxes for the Internal Revenue Service, with the collector entitled to retain fifty percent of the proceeds.
It was found by the House Ways and Means Committee that one of the collectors, John D. Sanborn, used information already brought to light by government employees in his collections, and had listed in one of his contracts the names of every railroad in the United States as being liable to collection of taxes on certain dividends.
The episode was called the Sanborn incident, and was tied to the resignation of William Adams Richardson as Secretary of the Treasury.
Government verified genuineness of such self-assessment through a process of audit, which may be selective or blanket applied to all tax-payers.
Then the Customs authorities calculate the leviable of amount of duties and taxes on the basis of that certified value.