Common Sense Millionaire
Common Sense Millionaire
EP 19: IRS Audits: Who’s Really Targeted and How to Protect Yourself
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/
Welcome to the Common Sense Millionaire, where we work to promote your financial advancement in knowledge process and education so that you and your family become financially secure. This is the place I share Common Sense Action Steps that you can take today to assist your financial advancement. So sit back, grab a drink and let's get started. Common Sense Millionaire here. Thanks for coming back and listening.
Speaker 1:You know, today this is kind of a. I feel kind of weird about this because I want to talk about who actually gets audited. We hear it all the time and we tell jokes about it. Oh, you know, cousins, so-and-so got audited or somebody got audited and they had to take all of their materials to the IRS office and meet with the examiner and all of that. So I thought we would talk about this. This brings back memories for me of I would actually have a booth at some events and to go after a particular type of client and it made sense, even if I only got one, because in the long term that you know it's fine, you know you're going to get a fee, you're going to do a good job and they'll be happy, they'll probably save money. They're not going to lose that client unless, say, they move to some faraway place like California or something.
Speaker 1:So I have a table, I'm set up, I have one of my associates there and we're sitting and then it's time to do the walk around and meet the people at the event. What's really interesting are the immense pride people have in getting their business going and that they're willing to pay fees to be able to sell their business. You've got people selling soap, baked goods, candy, artwork, all kinds of stuff. And you know, I walk through and I'm looking and I'm seeing cash exchange. I see credit cards going out there for from people buying things, and it all looks like it's wonderful. It's a really fascinating thing to me and everything's fine.
Speaker 1:Until you meet one of those people who you go when you talk to and you've got your card and you're like hey, you know I'm George and you know I prepare taxes, especially business taxes. Blah, blah, blah, blah, blah. Okay, you give your spiel, you talk to the people, but this particular group of folks was like I don't pay taxes. I haven't paid taxes in 15 years. Okay, now, normally when you talk with folks like that, I'm like okay, there's nothing I can say to these folks. They've got a belief system, so I'm out.
Speaker 1:But this time I engaged the gentleman about what I said under what authority are you not paying taxes? And he proceeded to explain how he was the descendant of this, he's a member of, the descendant of, and a member of, the Morris Nation, and he showed me his Morris Nation card and he says claims all because of this I don't pay any taxes, I don't have to pay sales taxes or anything like that. And I'm like, well, you know, that's really not true. I've heard of this and it is a scam that's going through the black community. And then he got loud you don't know what you're talking about. You should have somebody telling you what's going on. I was like, well, you know, I can kind of read and I see this, this is a thing that's been going 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'm exempt. I mean folks, yeah, do I really like sales tax? Oh, it gets on my nerves, I have to pay it. But the bottom line is, when you pay the sales tax, you're actually supporting your community, because those sales taxes which are at the state level go into the state treasury to pay for stuff like roads, schools, all of that, it's crazy. Also, taxes if you're paying taxes, as much as the system is criticized, it pays for the military, it pays for federal highway and other type of federal projects that actually support all of us Maybe not as much as we want, but it does support all of us. So when you say that, you know you hear it so often that you're like, oh gosh, well I guess I'm gonna have a talk with them. But I know that they're really not interested and so typically out of those types of events I may have one or two people call back and you know we have a chat and try and figure if we can get together to do some business.
Speaker 1:But what folk also don't understand is that guess who gets audited, guess who. Now recent article came out where the IRS actually admitted and had the data to show that black folk are more often to be audited than any other group. So when we look at that, while we see that the black community does have categories of wealth, okay that it doesn't make sense because the folk who are being audited are on the lower end of the wealth scale, right? So they're not even saying that it's the rich black people that they're auditing, but it's black folk at lower levels of the wealth scale and I'm like what the hell? That makes like no logical sense, as we've seen with the accusations against Trump that he was doing all kind of stuff with his tax returns, but they had had the tax returns for like six or years or something and nothing had been done with it, probably because the people couldn't figure out what was going on. So how do African-Americans lead the list of who gets audited?
Speaker 1:I think on a previous session I spoke about the expanding capability of IRS, the electronic resources, specifically the amount of electronic resources that they have to analyze tax returns. I don't know for a fact, but I can pretty much guarantee that they're looking at several things when it comes to African-Americans. It's looking at African-Americans that have a lower income but are showing business activity, probably with losses, and so if you're not showing any other income, how are you approving financial activities 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 your income doesn't look like it's able to support the assets that you have? This is really a warning to everyone. This is the type of analysis that the IRS is going to be doing in the future. It's not going to be a special situation, 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 of the IRS reports that comes out that really analyzes what's happening with tax returns for a specific tax year. I'll be able to be glad to get that to anyone who's interested.
Speaker 1:So why African-Americans? Why are black folk? I don't get this. It didn't make sense to me until I flashback to some of those events that I went to, the events where people are not turning in sales tax, people are not declaring cash transactions. That's one phase of it. So they figured out how can you support what you're doing with what you're bringing in? It's not making sense. We're doing things sometimes as black folk that are not making any sense Because, also, if you are not properly declaring income, how can you get a loan for your home?
Speaker 1:What's going to happen when you turn 65 and you're eligible for Social Security? You're not going to have anything there because you're not declaring the income to build up the long-term income to be eligible for Social Security. If I'm correct, social Security takes the highest income of the last 30 years to compute what your benefit is going to be. If you ain't got anything, then you'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. At that level. You can't do anything for your family. You can't even leave anything for your family when you leave the planet. I spent a lot of time making sure that there's going to be something left after me when I leave that planet, but it's going to be for the people who succeed me. What is really going on?
Speaker 1:The second big area is we lie about the kids. We say, well, I'm going to give the kids to Bobby this year and then next year Florence gets it and then the next year Jimmy gets it. This is what we were doing. That person would claim the dependent and get the deductions or any other tax credits that were available. Irs said this is BS. We're not doing this anymore. This is especially with couples that are divorced. It's so bad. Let me tell you how bad it is. So bad that I feel like I'm violating people's privacy because I need to ask for birth certificates 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't make sense, oh, the government's coming after me. They're coming after me with a $500 fine for each error.
Speaker 1:That also includes not having documentation. I have heard the stories of tax preparers where they get a letter from the IRS indicating that somebody's coming over to audit all of their tax credit filings to see if it's properly documented. I really don't like collecting birth certificates. That just seems a bit much to me, but it has to be done so that it's done right. Also, you just cannot declare that Bobby is going to get Jimmy and Susie is going to get Joanne. It's just not going to work.
Speaker 1:So the IRS came out with a form. You've got to fill the format. If one of the spouses wants to give the kids to someone else for tax purposes, they have to fill it out, sign it, and that's what's the basis for the filing. And of course, you have to keep that document in place or the government comes after you for that. So we've got Black folk business, black folk at home.
Speaker 1:Those are the key areas as to why we get audited more than anyone else. It's not. This is like this is nuts. It's really not making any sense and it's not helping any person, especially when we have marital differences and a lot of times people forget who's belonged to who and all of that. It's really very difficult to think these things through and that this leads to us being audited more than any other group. I mean we have to really pull this together because it's not making any sense and it's flagging black families as being somewhat fraudulent or you've been accused of fraud and it's really it's just not. It's not worth it. So how do we fix these things?
Speaker 1:If you have a business, if you're working on the side with someone, make sure that you're documenting your income. If you're working as a contractor with someone, get a 1099 so that it is declared properly, okay, because a lot of people are like, well, I'm not gonna report it, so I'm not gonna send it to you, so don't worry about it. Eventually, that catches up with you. It always catches up when something goes wrong and I always tell people doing LLCs. There's a box on the LLC that asks whether or not you have sent out 1099s to the acquired people. If you need help with that or if you need to know what the limits are on any of these issues, please feel free to contact commonsensemillionairecom and I'll be glad to help you.
Speaker 1:We have got to move forward. We have got to provide information that's accurate and timely so that we can move forward financially. It's not going to help by just putting it in your pocket, and we can show you ways that, even though you're declaring the income okay, there's still things you can do to offset some of that revenue with valid deductions, and that's very, very important. On the family situation folks, we got to do better. We all need to sit down and talk about this and do it the right way.
Speaker 1:If you have legal custody of the kids and you want to split one with the other the ex-spouse that is fabulous, because you're sharing the deduction. You're documenting that deduction so that if anybody comes to ask about it or sends a letter about it, it's very simple Me as a preparer, contact with the person. Here's the form scan it, attach it to an email and send it back and you're done, and you don't have the IRS breathing down your neck that you're doing something wrong and also I don't have to pay a $500 fine for not doing it properly. That's very important. So again, just give me a call. I mean, this is a big deal.
Speaker 1:It bothers me all the time when I go to these events and I know people are not in compliance. It just bothers me because it doesn't make sense. There's so much more that you can do and how we can plan, instead of sitting at an event telling me well, look, I got a Cadillac out there, I'm not worried about this. I mean, this is what Guy told me and I was speechless and you all know at this point that I am rarely ever speechless, but I'm just speechless. So let's figure it out, get in touch, be glad to help you fix it and we'll see you next time. You've been listening to the Common Sense Millionaire, where you can learn how to go from zero to a million using Common Sense solutions to everyday financial issues. Make sure and subscribe to stay connected for more content, tools and help so you can advance towards your financial goals. If you need assistance or have questions, leave a comment or you can email me at george at commonsensemillionairecom.
