December 13, 2023 • 16 mins
Ready to bust some myths about who gets audited the most?
Spoiler alert: it's not your wealthy neighbor!
In this episode of Common Sense Millionaire, I reveal the harsh truth about IRS practices and how they disproportionately impact African-Americans, particularly those with lower-income brackets who are business owners.
This episode dives deep into the world of audits, giving away the mystery around increasing electronic resources at the IRS's disposal and how even the rich are not out of the auditor's scope! I'm also going to shed light on the financial challenges black Americans face when dealing with taxes. If you've ever thought about fudging the numbers or incorrectly declaring dependents - don't! The IRS has some hefty penalties for those who stray from the straight and narrow.
I'm here to help you understand how to accurately document your income and file the correct forms to avoid these fines. Plus, I'll guide you on how to properly record your deductions, especially when legal custody is shared with an ex-spouse.
Whatever your situation is, I've got you covered with practical advice to stay in compliance with the IRS.
You don't want to miss this!
Thank you for listening to The Millionaire Mindset Podcast with George Dines.
To connect with George visit www.georgedines.com
To Schedule a call with George visit: https://georgedines.com/contact/
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Welcome to the Common Sense Millionaire, where we
work to promote your financialadvancement in knowledge process
and education so that you andyour family become financially
secure.
This is the place I shareCommon Sense Action Steps that
you can take today to assistyour financial advancement.
So sit back, grab a drink andlet's get started.
(00:23):
Common Sense Millionaire here.
Thanks for coming back andlistening.
You know, today this is kind ofa.
I feel kind of weird about thisbecause I want to talk about
who actually gets audited.
We hear it all the time and wetell jokes about it.
(00:43):
Oh, you know, cousins,so-and-so got audited or
somebody got audited and theyhad to take all of their
materials to the IRS office andmeet with the examiner and all
of that.
So I thought we would talkabout this.
This brings back memories forme of I would actually have a
(01:06):
booth at some events and to goafter a particular type of
client and it made sense, evenif I only got one, because in
the long term that you know it'sfine, you know you're going to
get a fee, you're going to do agood job and they'll be happy,
they'll probably save money.
They're not going to lose thatclient unless, say, they move to
(01:27):
some faraway place likeCalifornia or something.
So I have a table, I'm set up, Ihave one of my associates there
and we're sitting and then it'stime to do the walk around and
meet the people at the event.
What's really interesting arethe immense pride people have in
(01:50):
getting their business goingand that they're willing to pay
fees to be able to sell theirbusiness.
You've got people selling soap,baked goods, candy, artwork,
all kinds of stuff.
And you know, I walk throughand I'm looking and I'm seeing
cash exchange.
(02:11):
I see credit cards going outthere for from people buying
things, and it all looks likeit's wonderful.
It's a really fascinating thingto me and everything's fine.
Until you meet one of thosepeople who you go when you talk
to and you've got your card andyou're like hey, you know I'm
(02:31):
George and you know I preparetaxes, especially business taxes
.
Blah, blah, blah, blah, blah.
Okay, you give your spiel, youtalk to the people, but this
particular group of folks waslike I don't pay taxes.
I haven't paid taxes in 15years.
Okay, now, normally when youtalk with folks like that, I'm
(02:53):
like okay, there's nothing I cansay to these folks.
They've got a belief system, soI'm out.
But this time I engaged thegentleman about what I said
under what authority are you notpaying taxes?
And he proceeded to explain howhe was the descendant of this,
he's a member of, the descendantof, and a member of, the Morris
(03:17):
Nation, and he showed me hisMorris Nation card and he says
claims all because of this Idon't pay any taxes, I don't
have to pay sales taxes oranything like that.
And I'm like, well, you know,that's really not true.
I've heard of this and it is ascam that's going through the
(03:39):
black community.
And then he got loud you don'tknow what you're talking about.
You should have somebodytelling you what's going on.
I was like, well, you know, Ican kind of read and I see this,
this is a thing that's beengoing around for a long time.
And I said, but you know,you're not paying sales tax or
anything, I don't have to, I'mexempt.
I mean folks, yeah, do I reallylike sales tax?
(04:01):
Oh, it gets on my nerves, Ihave to pay it.
But the bottom line is, whenyou pay the sales tax, you're
actually supporting yourcommunity, because those sales
taxes which are at the statelevel go into the state treasury
to pay for stuff like roads,schools, all of that, it's crazy
(04:22):
.
Also, taxes if you're payingtaxes, as much as the system is
criticized, it pays for themilitary, it pays for federal
highway and other type offederal projects that actually
support all of us Maybe not asmuch as we want, but it does
support all of us.
So when you say that, you knowyou hear it so often that you're
(04:46):
like, oh gosh, well I guess I'mgonna have a talk with them.
But I know that they're reallynot interested and so typically
out of those types of events Imay have one or two people call
back and you know we have a chatand try and figure if we can
get together to do some business.
But what folk also don'tunderstand is that guess who
(05:10):
gets audited, guess who.
Now recent article came outwhere the IRS actually admitted
and had the data to show thatblack folk are more often to be
audited than any other group.
So when we look at that, whilewe see that the black community
(05:36):
does have categories of wealth,okay that it doesn't make sense
because the folk who are beingaudited are on the lower end of
the wealth scale, right?
So they're not even saying thatit's the rich black people that
they're auditing, but it'sblack folk at lower levels of
(05:59):
the wealth scale and I'm likewhat the hell?
That makes like no logicalsense, as we've seen with the
accusations against Trump thathe was doing all kind of stuff
with his tax returns, but theyhad had the tax returns for like
six or years or something andnothing had been done with it,
probably because the peoplecouldn't figure out what was
(06:19):
going on.
So how do African-Americanslead the list of who gets
audited?
I think on a previous session Ispoke about the expanding
capability of IRS, theelectronic resources,
specifically the amount ofelectronic resources that they
(06:42):
have to analyze tax returns.
I don't know for a fact, but Ican pretty much guarantee that
they're looking at severalthings when it comes to
African-Americans.
It's looking atAfrican-Americans that have a
lower income but are showingbusiness activity, probably with
(07:02):
losses, and so if you're notshowing any other income, how
are you approving financialactivities for yourself, such as
how are you buying a car?
How are you buying groceries?
How are you buying a house?
How do you do that when yourincome doesn't look like it's
(07:22):
able to support the assets thatyou have?
This is really a warning toeveryone.
This is the type of analysisthat the IRS is going to be
doing in the future.
It's not going to be a specialsituation, it's going to be out
of the box as filings occur.
If anyone's really interested,you can contact me and I can
show you and email to you one ofthe IRS reports that comes out
(07:46):
that really analyzes what'shappening with tax returns for a
specific tax year.
I'll be able to be glad to getthat to anyone who's interested.
So why African-Americans?
Why are black folk?
I don't get this.
It didn't make sense to meuntil I flashback to some of
those events that I went to, theevents where people are not
(08:11):
turning in sales tax, people arenot declaring cash transactions
.
That's one phase of it.
So they figured out how can yousupport what you're doing with
what you're bringing in?
It's not making sense.
We're doing things sometimes asblack folk that are not making
(08:31):
any sense Because, also, if youare not properly declaring
income, how can you get a loanfor your home?
What's going to happen when youturn 65 and you're eligible for
Social Security?
You're not going to haveanything there because you're
not declaring the income tobuild up the long-term income to
(08:55):
be eligible for Social Security.
If I'm correct, social Securitytakes the highest income of the
last 30 years to compute whatyour benefit is going to be.
If you ain't got anything, thenyou're going to get the lowest
rate possible, which is maybe$1,200, $1,400 a month.
Why do you want to be there?
It doesn't make any sense.
(09:16):
At that level.
You can't do anything for yourfamily.
You can't even leave anythingfor your family when you leave
the planet.
I spent a lot of time makingsure that there's going to be
something left after me when Ileave that planet, but it's
going to be for the people whosucceed me.
What is really going on?
(09:36):
The second big area is we lieabout the kids.
We say, well, I'm going to givethe kids to Bobby this year and
then next year Florence gets itand then the next year Jimmy
gets it.
This is what we were doing.
That person would claim thedependent and get the deductions
(09:58):
or any other tax credits thatwere available.
Irs said this is BS.
We're not doing this anymore.
This is especially with couplesthat are divorced.
It's so bad.
Let me tell you how bad it is.
So bad that I feel like I'mviolating people's privacy
(10:21):
because I need to ask for birthcertificates of their kids.
I need to see birth certificate.
If your divorce are separated,I need to see the divorce decree
and or the separation agreement, because if I put something
down that's bogus, that doesn'tmake sense, oh, the government's
(10:43):
coming after me.
They're coming after me with a$500 fine for each error.
That also includes not havingdocumentation.
I have heard the stories of taxpreparers where they get a
letter from the IRS indicatingthat somebody's coming over to
(11:03):
audit all of their tax creditfilings to see if it's properly
documented.
I really don't like collectingbirth certificates.
That just seems a bit much tome, but it has to be done so
that it's done right.
Also, you just cannot declarethat Bobby is going to get Jimmy
(11:25):
and Susie is going to getJoanne.
It's just not going to work.
So the IRS came out with a form.
You've got to fill the format.
If one of the spouses wants togive the kids to someone else
for tax purposes, they have tofill it out, sign it, and that's
what's the basis for the filing.
And of course, you have to keepthat document in place or the
(11:47):
government comes after you forthat.
So we've got Black folkbusiness, black folk at home.
Those are the key areas as towhy we get audited more than
anyone else.
It's not.
This is like this is nuts.
(12:08):
It's really not making anysense and it's not helping any
person, especially when we havemarital differences and a lot of
times people forget who'sbelonged to who and all of that.
It's really very difficult tothink these things through and
that this leads to us beingaudited more than any other
(12:31):
group.
I mean we have to really pullthis together because it's not
making any sense and it'sflagging black families as being
somewhat fraudulent or you'vebeen accused of fraud and it's
really it's just not.
It's not worth it.
So how do we fix these things?
(12:57):
If you have a business, ifyou're working on the side with
someone, make sure that you'redocumenting your income.
If you're working as acontractor with someone, get a
1099 so that it is declaredproperly, okay, because a lot of
people are like, well, I'm notgonna report it, so I'm not
(13:18):
gonna send it to you, so don'tworry about it.
Eventually, that catches upwith you.
It always catches up whensomething goes wrong and I
always tell people doing LLCs.
There's a box on the LLC thatasks whether or not you have
sent out 1099s to the acquiredpeople.
If you need help with that orif you need to know what the
(13:39):
limits are on any of theseissues, please feel free to
contactcommonsensemillionairecom and
I'll be glad to help you.
We have got to move forward.
We have got to provideinformation that's accurate and
timely so that we can moveforward financially.
It's not going to help by justputting it in your pocket, and
(14:03):
we can show you ways that, eventhough you're declaring the
income okay, there's stillthings you can do to offset some
of that revenue with validdeductions, and that's very,
very important.
On the family situation folks,we got to do better.
We all need to sit down andtalk about this and do it the
(14:24):
right way.
If you have legal custody of thekids and you want to split one
with the other the ex-spousethat is fabulous, because you're
sharing the deduction.
You're documenting thatdeduction so that if anybody
comes to ask about it or sends aletter about it, it's very
simple Me as a preparer, contactwith the person.
(14:45):
Here's the form scan it, attachit to an email and send it back
and you're done, and you don'thave the IRS breathing down your
neck that you're doingsomething wrong and also I don't
have to pay a $500 fine for notdoing it properly.
That's very important.
So again, just give me a call.
(15:05):
I mean, this is a big deal.
It bothers me all the time whenI go to these events and I know
people are not in compliance.
It just bothers me because itdoesn't make sense.
There's so much more that youcan do and how we can plan,
instead of sitting at an eventtelling me well, look, I got a
(15:26):
Cadillac out there, I'm notworried about this.
I mean, this is what Guy toldme and I was speechless and you
all know at this point that I amrarely ever speechless, but I'm
just speechless.
So let's figure it out, get intouch, be glad to help you fix
it and we'll see you next time.
You've been listening to theCommon Sense Millionaire, where
(15:49):
you can learn how to go fromzero to a million using Common
Sense solutions to everydayfinancial issues.
Make sure and subscribe to stayconnected for more content,
tools and help so you canadvance towards your financial
goals.
If you need assistance or havequestions, leave a comment or
you can email me at george atcommonsensemillionairecom.
Welcome to the Common Sense Millionaire, where we
work to promote your financialadvancement in knowledge process
and education so that you andyour family become financially
secure.
This is the place I shareCommon Sense Action Steps that
you can take today to assistyour financial advancement.
So sit back, grab a drink andlet's get started.
(00:23):
Common Sense Millionaire here.
Thanks for coming back andlistening.
You know, today this is kind ofa.
I feel kind of weird about thisbecause I want to talk about
who actually gets audited.
We hear it all the time and wetell jokes about it.
(00:43):
Oh, you know, cousins,so-and-so got audited or
somebody got audited and theyhad to take all of their
materials to the IRS office andmeet with the examiner and all
of that.
So I thought we would talkabout this.
This brings back memories forme of I would actually have a
(01:06):
booth at some events and to goafter a particular type of
client and it made sense, evenif I only got one, because in
the long term that you know it'sfine, you know you're going to
get a fee, you're going to do agood job and they'll be happy,
they'll probably save money.
They're not going to lose thatclient unless, say, they move to
(01:27):
some faraway place likeCalifornia or something.
So I have a table, I'm set up, Ihave one of my associates there
and we're sitting and then it'stime to do the walk around and
meet the people at the event.
What's really interesting arethe immense pride people have in
(01:50):
getting their business goingand that they're willing to pay
fees to be able to sell theirbusiness.
You've got people selling soap,baked goods, candy, artwork,
all kinds of stuff.
And you know, I walk throughand I'm looking and I'm seeing
cash exchange.
(02:11):
I see credit cards going outthere for from people buying
things, and it all looks likeit's wonderful.
It's a really fascinating thingto me and everything's fine.
Until you meet one of thosepeople who you go when you talk
to and you've got your card andyou're like hey, you know I'm
(02:31):
George and you know I preparetaxes, especially business taxes
.
Blah, blah, blah, blah, blah.
Okay, you give your spiel, youtalk to the people, but this
particular group of folks waslike I don't pay taxes.
I haven't paid taxes in 15years.
Okay, now, normally when youtalk with folks like that, I'm
(02:53):
like okay, there's nothing I cansay to these folks.
They've got a belief system, soI'm out.
But this time I engaged thegentleman about what I said
under what authority are you notpaying taxes?
And he proceeded to explain howhe was the descendant of this,
he's a member of, the descendantof, and a member of, the Morris
(03:17):
Nation, and he showed me hisMorris Nation card and he says
claims all because of this Idon't pay any taxes, I don't
have to pay sales taxes oranything like that.
And I'm like, well, you know,that's really not true.
I've heard of this and it is ascam that's going through the
(03:39):
black community.
And then he got loud you don'tknow what you're talking about.
You should have somebodytelling you what's going on.
I was like, well, you know, Ican kind of read and I see this,
this is a thing that's beengoing around for a long time.
And I said, but you know,you're not paying sales tax or
anything, I don't have to, I'mexempt.
I mean folks, yeah, do I reallylike sales tax?
(04:01):
Oh, it gets on my nerves, Ihave to pay it.
But the bottom line is, whenyou pay the sales tax, you're
actually supporting yourcommunity, because those sales
taxes which are at the statelevel go into the state treasury
to pay for stuff like roads,schools, all of that, it's crazy
(04:22):
.
Also, taxes if you're payingtaxes, as much as the system is
criticized, it pays for themilitary, it pays for federal
highway and other type offederal projects that actually
support all of us Maybe not asmuch as we want, but it does
support all of us.
So when you say that, you knowyou hear it so often that you're
(04:46):
like, oh gosh, well I guess I'mgonna have a talk with them.
But I know that they're reallynot interested and so typically
out of those types of events Imay have one or two people call
back and you know we have a chatand try and figure if we can
get together to do some business.
But what folk also don'tunderstand is that guess who
(05:10):
gets audited, guess who.
Now recent article came outwhere the IRS actually admitted
and had the data to show thatblack folk are more often to be
audited than any other group.
So when we look at that, whilewe see that the black community
(05:36):
does have categories of wealth,okay that it doesn't make sense
because the folk who are beingaudited are on the lower end of
the wealth scale, right?
So they're not even saying thatit's the rich black people that
they're auditing, but it'sblack folk at lower levels of
(05:59):
the wealth scale and I'm likewhat the hell?
That makes like no logicalsense, as we've seen with the
accusations against Trump thathe was doing all kind of stuff
with his tax returns, but theyhad had the tax returns for like
six or years or something andnothing had been done with it,
probably because the peoplecouldn't figure out what was
(06:19):
going on.
So how do African-Americanslead the list of who gets
audited?
I think on a previous session Ispoke about the expanding
capability of IRS, theelectronic resources,
specifically the amount ofelectronic resources that they
(06:42):
have to analyze tax returns.
I don't know for a fact, but Ican pretty much guarantee that
they're looking at severalthings when it comes to
African-Americans.
It's looking atAfrican-Americans that have a
lower income but are showingbusiness activity, probably with
(07:02):
losses, and so if you're notshowing any other income, how
are you approving financialactivities for yourself, such as
how are you buying a car?
How are you buying groceries?
How are you buying a house?
How do you do that when yourincome doesn't look like it's
(07:22):
able to support the assets thatyou have?
This is really a warning toeveryone.
This is the type of analysisthat the IRS is going to be
doing in the future.
It's not going to be a specialsituation, it's going to be out
of the box as filings occur.
If anyone's really interested,you can contact me and I can
show you and email to you one ofthe IRS reports that comes out
(07:46):
that really analyzes what'shappening with tax returns for a
specific tax year.
I'll be able to be glad to getthat to anyone who's interested.
So why African-Americans?
Why are black folk?
I don't get this.
It didn't make sense to meuntil I flashback to some of
those events that I went to, theevents where people are not
(08:11):
turning in sales tax, people arenot declaring cash transactions
.
That's one phase of it.
So they figured out how can yousupport what you're doing with
what you're bringing in?
It's not making sense.
We're doing things sometimes asblack folk that are not making
(08:31):
any sense Because, also, if youare not properly declaring
income, how can you get a loanfor your home?
What's going to happen when youturn 65 and you're eligible for
Social Security?
You're not going to haveanything there because you're
not declaring the income tobuild up the long-term income to
(08:55):
be eligible for Social Security.
If I'm correct, social Securitytakes the highest income of the
last 30 years to compute whatyour benefit is going to be.
If you ain't got anything, thenyou're going to get the lowest
rate possible, which is maybe$1,200, $1,400 a month.
Why do you want to be there?
It doesn't make any sense.
(09:16):
At that level.
You can't do anything for yourfamily.
You can't even leave anythingfor your family when you leave
the planet.
I spent a lot of time makingsure that there's going to be
something left after me when Ileave that planet, but it's
going to be for the people whosucceed me.
What is really going on?
(09:36):
The second big area is we lieabout the kids.
We say, well, I'm going to givethe kids to Bobby this year and
then next year Florence gets itand then the next year Jimmy
gets it.
This is what we were doing.
That person would claim thedependent and get the deductions
(09:58):
or any other tax credits thatwere available.
Irs said this is BS.
We're not doing this anymore.
This is especially with couplesthat are divorced.
It's so bad.
Let me tell you how bad it is.
So bad that I feel like I'mviolating people's privacy
(10:21):
because I need to ask for birthcertificates of their kids.
I need to see birth certificate.
If your divorce are separated,I need to see the divorce decree
and or the separation agreement, because if I put something
down that's bogus, that doesn'tmake sense, oh, the government's
(10:43):
coming after me.
They're coming after me with a$500 fine for each error.
That also includes not havingdocumentation.
I have heard the stories of taxpreparers where they get a
letter from the IRS indicatingthat somebody's coming over to
(11:03):
audit all of their tax creditfilings to see if it's properly
documented.
I really don't like collectingbirth certificates.
That just seems a bit much tome, but it has to be done so
that it's done right.
Also, you just cannot declarethat Bobby is going to get Jimmy
(11:25):
and Susie is going to getJoanne.
It's just not going to work.
So the IRS came out with a form.
You've got to fill the format.
If one of the spouses wants togive the kids to someone else
for tax purposes, they have tofill it out, sign it, and that's
what's the basis for the filing.
And of course, you have to keepthat document in place or the
(11:47):
government comes after you forthat.
So we've got Black folkbusiness, black folk at home.
Those are the key areas as towhy we get audited more than
anyone else.
It's not.
This is like this is nuts.
(12:08):
It's really not making anysense and it's not helping any
person, especially when we havemarital differences and a lot of
times people forget who'sbelonged to who and all of that.
It's really very difficult tothink these things through and
that this leads to us beingaudited more than any other
(12:31):
group.
I mean we have to really pullthis together because it's not
making any sense and it'sflagging black families as being
somewhat fraudulent or you'vebeen accused of fraud and it's
really it's just not.
It's not worth it.
So how do we fix these things?
(12:57):
If you have a business, ifyou're working on the side with
someone, make sure that you'redocumenting your income.
If you're working as acontractor with someone, get a
1099 so that it is declaredproperly, okay, because a lot of
people are like, well, I'm notgonna report it, so I'm not
(13:18):
gonna send it to you, so don'tworry about it.
Eventually, that catches upwith you.
It always catches up whensomething goes wrong and I
always tell people doing LLCs.
There's a box on the LLC thatasks whether or not you have
sent out 1099s to the acquiredpeople.
If you need help with that orif you need to know what the
(13:39):
limits are on any of theseissues, please feel free to
contactcommonsensemillionairecom and
I'll be glad to help you.
We have got to move forward.
We have got to provideinformation that's accurate and
timely so that we can moveforward financially.
It's not going to help by justputting it in your pocket, and
(14:03):
we can show you ways that, eventhough you're declaring the
income okay, there's stillthings you can do to offset some
of that revenue with validdeductions, and that's very,
very important.
On the family situation folks,we got to do better.
We all need to sit down andtalk about this and do it the
(14:24):
right way.
If you have legal custody of thekids and you want to split one
with the other the ex-spousethat is fabulous, because you're
sharing the deduction.
You're documenting thatdeduction so that if anybody
comes to ask about it or sends aletter about it, it's very
simple Me as a preparer, contactwith the person.
(14:45):
Here's the form scan it, attachit to an email and send it back
and you're done, and you don'thave the IRS breathing down your
neck that you're doingsomething wrong and also I don't
have to pay a $500 fine for notdoing it properly.
That's very important.
So again, just give me a call.
(15:05):
I mean, this is a big deal.
It bothers me all the time whenI go to these events and I know
people are not in compliance.
It just bothers me because itdoesn't make sense.
There's so much more that youcan do and how we can plan,
instead of sitting at an eventtelling me well, look, I got a
(15:26):
Cadillac out there, I'm notworried about this.
I mean, this is what Guy toldme and I was speechless and you
all know at this point that I amrarely ever speechless, but I'm
just speechless.
So let's figure it out, get intouch, be glad to help you fix
it and we'll see you next time.
You've been listening to theCommon Sense Millionaire, where
(15:49):
you can learn how to go fromzero to a million using Common
Sense solutions to everydayfinancial issues.
Make sure and subscribe to stayconnected for more content,
tools and help so you canadvance towards your financial
goals.
If you need assistance or havequestions, leave a comment or
you can email me at george atcommonsensemillionairecom.
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I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy And Charlamagne Tha God!
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.