5 things to know about Tax Day: Refunds are up, audits down

Tuesday is Tax Day, that dreaded day when millions of procrastinators rush to fulfill their civic duty by filing state and federal tax returns.

But for most, it's not that bad. Sure, the forms are complicated and yes, there is math. But tax season also generates about $300 billion in refunds, a significant boost to the U.S. economy.

Five things to know about Tax Day:

1) Most get refunds

The IRS so far has processed 101 million tax returns from individuals and about 80 percent have qualified for refunds. The average refund is $2,851, an increase of $53 over last year.

By the end of filing season, the IRS expects to process 150 million returns. That's after millions file for automatic six-month extensions.

2) Chances of getting audited are slim

The number of people audited by the IRS in 2016 dropped for the sixth straight year, to just over 1 million. That's less than 1 percent of filers.

The last time so few people were audited was 2004. Since then, the U.S. has added about 30 million people.

The IRS blames budget cuts as money for the agency shrank from $12.2 billion in 2010 to $11.2 billion last year.

But rich people beware. The higher your income, the more likely you are to be audited. Agents audited 5.8 percent of returns that reported more than $1 million in income.

3) Returns down, refunds delayed

Tax season got off to a slow start because the IRS delayed refunds for more than 40 million low-income families as part of the agency's efforts to fight identity theft.

The delays affected families claiming the earned income tax credit and the additional child tax credit. The tax breaks are geared to benefit the working poor, and many families claim both.

The tax filing season started Jan. 23. But a new law required the IRS to delay tax refunds for people claiming these credits until Feb. 15.

The delay was designed to give the agency more time to screen the returns for fraud. Throughout the tax filing season, the number of tax returns processed by the IRS has been lower than last year.

As of April 7, the IRS had received 104 million tax returns and processed 101 million. Both numbers are down about 3.5 percent from last year.

4) People illegally in the U.S. pay taxes

There is a common myth that people in the U.S. illegally don't pay taxes. But data from both the IRS and the Social Security Administration says otherwise.

Yes, some work in the underground economy. But in 2015, the Social Security Administration estimated that immigrants who are in the U.S. illegally paid $100 billion in Social Security payroll taxes over the previous decade. They paid the taxes even though few will ever be able to collect benefits.

How does Social Security know when it receives taxes from immigrants who are in the U.S. illegally? One way is by tracking reported wages in which the Social Security number does not match the name the agency has on file.

Some of these are clerical errors or unreported name changes. But the agency estimates that a majority of the wages come from immigrants who have made-up Social Security numbers or used someone else's.

Also, the IRS has issued more than 20 million Individual Taxpayer Identification Numbers (ITINs) to foreigners.

The ITINs are supposed to be used by foreigners who have some form of U.S. income, and therefore owe U.S. taxes. However, the tax agency believes that many of them are used by people who are working in the U.S. illegally.

5) Tax Day isn't much of a deadline if you're due a refund

The IRS doesn't like to talk about it, but penalties for filing late federal tax returns apply only to people who owe money. The penalty is a percentage of what you owe. If you owe nothing, there is no penalty.

But it doesn't make much sense to file late if you are owed a refund. And beware — if you have unpaid taxes, the late fees add up quickly.

The failure-to-file penalty is generally 5 percent of your unpaid tax bill for every month, or part of a month, you are late. It kicks in on April 19. In general, the maximum penalty is 25 percent of your original tax bill.

There also is a penalty for failing to pay your tax bill, separate from the penalty for failing to file at all, but it's much smaller. That's because the IRS wants you to file a return even if you don't have enough money to pay your bill.

The failure-to-pay penalty is 0.5 percent of your unpaid taxes for every month, or part of a month, you don't pay.