5 Things to Know About Tax Day: Refunds Are Up, Audits Down - NBC Southern California

5 Things to Know About Tax Day: Refunds Are Up, Audits Down



    Top Tools for Filing Your Taxes Yourself

    Consumer Reports took a look at the three most popular products to help you go it alone this tax season. Consumer Reporter Susan Hogan has the details.

    (Published Friday, April 7, 2017)

    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. 

    Here are five things to know about Tax Day: 

    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. 

    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. 

    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. 

    Tax Tuesday: Late Filing Tips

    [NATL-NECN]Tax Tuesday: Late Filing Tips

    The deadline for filing your taxes is right around the corner, and if you’re a procrastinator, you may want to think twice about putting off filing that return.

    Mark Nichols, member of the Massachusetts Society of CPAs, said the penalties and interest for filing or paying late can pile up.

    "People who file late can incur one of three different penalties: There’s a late filing penalty, a late paying penalty, or interest," Nichols said. “"Now, if you don’t owe any tax – you don’t have a balance on your return by the time you’re done – you don’t have any penalties."

    If you’re not in a position to pay taxes, the IRS and Department of Revenue offer installment plans. You can set up a plan within two weeks of filing. This year’s filing deadline is April 18.

    (Published Tuesday, April 11, 2017)

    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. 

    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. 

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    (Published Monday, April 10, 2017)

    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. 

    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. 

    Tax Day Tips: Beware of Scams, Reminders for Returns

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    NBC Bay Area Responds is taking questions from viewers about the IRS. Consumer Investigator Chris Chmura reports with a few topics we are helping them with.

    (Published Friday, April 14, 2017)

    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.