Unpacking The History of Black Taxation in the US | Ep. 278

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Tiffany Grant: Hey, everyone. I am extremely excited on the podcast today because I have Kamari Ellis enrolled Agent Tex extraordinaire. And if you were wondering who I go to to ask tax questions, it is this man right here. So I am so excited to have him on the podcast, because he is a wealth of knowledge, and we are going to talk about something that is very important to both of us, and that is black wealth. But we’re going to talk about it in the lens of taxes. So, hey, Kamari, how are you today?

Camari Ellis: Hey, Tiffany. Thank you for having me.

Tiffany Grant: Yes, thank you for coming on. I am honored. So, to give the audience a little bit about what we’re going to talk about, just give us a little bit about how taxes have played a role over the history of the US as it relates to black people. And I know that is a loaded question. That is a loaded question, but we got to start somewhere. So give us a little bit about how the tax laws have played a part in black wealth.

Camari Ellis: I mean, great question. Great way to start. Taxes have been an integral part of the black experience in North America since, I guess, slavery or enslavement. when you think about it, black people were assets before they were actual people. Black people were treated as animals. Black people’s assets were taxed, which led to the Civil War, one of the bloodiest wars that this country has ever faced. And so when you look at that, our history here is very inextricably linked to taxation. So I think it’s important for us to really take control over the situation. But, no, I was going to say there’s a book that I’ve been trying to work my way through called the Whiteness of Wealth. And it just talks about how the tax system is not fair to black people overall. Also, and it’s written by a wonderful lady sister, by the name of Dorothy Brown, who is a law professor. so she’s a tax attorney talking about this, and she did the research, and she just kind of broke it down and know everything about tax. And the tax system in America is really framed around whiteness. And when you really break it down, right, this is outside of the book. This is just how I see things. Every financial transaction comes back to tax. Everything that you spend money on involves tax, whether it be a car purchase, a purchase of pop, or soda, depending on what part of the country you’re in. Right. buying clothing. I mean, sometimes it sales tax free, but a lot of times it is taxed. So it just depends on what you got going on. And the big one is, when people get their paychecks every week or every month, they’re paying a big amount of it to taxes. So, in my opinion, it’s really important for us to really take control and understand taxes so we can use it to empower ourselves and better our overall wealth journey. I say the tax code is a cheat code.

Tiffany Grant: M. And I’m glad you brought that up, because my grandpa said the other day he was like, taxes is what’s keeping people in poverty. Because everywhere you look around is taxes, gas, buying anything out the store, income tax, everything, just like you said. So I’m glad you brought that up, because he just mentioned that to me the other day, and when I thought about it, I’m like, dang you, right? There’s a lot of taxes.

Camari Ellis: A whole lot. And we don’t. I mean, I find it interesting, right. The whole reason this country was even founded was because no taxation without representation. The colonists were mad that Britain was taxing, and they felt that they weren’t getting the appropriate services for the amount of money they were being taxed. Right? They fought a whole war over this. Fast forward, what, 200, 300, 400 years. Now, 300 years later, we kind of have the same system. So it’s funny how history really repeats itself, for sure.

Tiffany Grant: And now that you say that, I’m like, dang, I forgot about the whole Boston, tea Party and all that stuff. once you get out of school, it’s like you forget all about that.

Tiffany Grant: But, I wanted to zoom in a little bit on what you said about how it affects black wealth and what, are some things that you see or that you’ve read in the book, that kind of supports that.

Camari Ellis: So there was one point that was made. The tax system was changed because many times, rich folks, white folks, have single, income households, two family, two parent households. But typically, the man is bringing in the money. However.

Camari Ellis: With black folks, that’s never been our history. That’s never been our experience here. It’s always been a man and a woman working together in some shape or fashion, generally speaking. And so when you look at that and you look at the overall taxation of things, you’re getting taxed on, let’s say, $100,000 a man’s bringing in, but they’re paying a lower amount of tax on a black family that has a man and a woman who are, say, bringing $100,000 in. When you look at the overall percentage of taxation being paid because there are more financial benefits for families that are single income families, right. So you have man at work, woman at home, usually taking care of the children, usually doing all the other domestic work, which has a value. Right. So I don’t want to get in trouble with that, saying it doesn’t have a value. Right. It does have a value, but a lot of times they don’t have to pay for those things or those costs are contained in home. Black families don’t have that. So we’re already at a disadvantage a lot of times when we go that route.

Tiffany Grant: M and you bring up a good point, because just as a single mom myself, when I was working outside the home, I had to put my kids in daycare. And daycare is expensive. And even, clients that I have, it’s taken a whole paycheck just for daycare.

Camari Ellis: Daycare almost killed me and my wife, early on because we have three children altogether, but two of them are stale stepped our two youngest, so they’re about 18 months apart. And just imagine they were both in daycare at the same time around the age of three to three or five. So you’re talking two, three grand a month. I don’t remember exactly what it was, but Jeez Louise.

Tiffany Grant: And it hasn’t changed. And it hasn’t changed. It’s gone up. Right. Exactly. And so if you think about it, for some households, like 3000 a month, that’s a whole month’s worth of work. And so I’ve had clients before where I’m like, just looking at the daycare cost, does it even make sense to go to work when your significant other is working? So I definitely see how that can play a part, in the whole tax picture, because usually, like you said, in black families, it is two people working. If it’s a couple, it’s not one staying home. And so you’re getting tax from both angles.

Tiffany Grant: And so let me ask you a question in regards to that, too, because they say if you file married, filing together, then you get tax less. But is that usually the case when it comes to just based on our conversation right now? I guess.

Camari Ellis: No, I m mean, that’s a good question. Right. You do get taxed less usually. Right. The thing is, when you file. So there’s roughly four or five different filing statuses. So you have single.

Camari Ellis: You have head of household you have married filing separate, which is a couple that are married legally married, but they choose the file taxes separately. Then you have married filing jointly, and then you have like a widower status if you are recently widowed. To your question, married, filing jointly gives you more deductions a lot of times, right, your standard deduction is higher. and what happens is, and bringing back if I’d lose you here, they give preferential treatment to couples who are married filing jointly just for when they’re filing their taxes. So you’re filing married filing separately. I want to say the standard tax deduction right now for married filing separately is like 25 or $26,000. So right off the bat, you get to subtract $26,000 off your income. So if you made $100,000, right off the bat, you only have taxable income of $74,000 because that $26,000 reduces, your income immediately if you are filing married filing separately, it’s usually half of that because they’re trying to split it up between the two couples. But then it affects other things, like IRA contributions and some other little wacky things usually gets halved. And so sometimes it could work backwards in their way. I, ah, see, especially if couples are really combining their money together and exercising their full financial might together, but it’ll have it. Now, here’s one thing a lot of people don’t think about.

Camari Ellis: If you have a spouse who maybe works a lot, has a business not so responsible when it comes to paying their tax, and they don’t want to combine their tax bills together, their tax liability together, it could be smart to do married filing separately in the long run, because any debt you occur tax wise when you’re married, if you file jointly, it’s joined together, so it’s both of yours. So if you all wind up having $100,000 in tax debt, it’s the mans and wives or the man and man, or the woman and woman these days, right? So it’s whoever the spouses are, they share it completely together. But again, if you file married filing separately, his debt is his debt, her debt is her debt, and everybody can keep going that way.

Tiffany Grant: well, that’s good information, and I’m over here taking notes, you all, because like I said, every time I talk to them, I learn something. So, that’s good to know. So if there’s a situation where a couple, they do have their finances together or what have you, but one is not, maybe they run a business or whatever it is, and they’re not apt to filing their taxes, especially on time and stuff. then it would be more beneficial to file separately in that case. Got you. And going back to our other conversation. I see how. Because even if for tax purposes, if you’re married, you’re married. And so it doesn’t matter if it’s two incomes coming in, if it’s one, you still get the same deduction.

Camari Ellis: Right?

Tiffany Grant: okay. So that makes complete sense as to why that would be an issue, for black households, for sure. Okay, so what if we have people listening? They’re like, this doesn’t apply to me. They’re like, I’m not married. I don’t plan on getting married. What are m some other things in the tax code that are not beneficial to black wealth?

Camari Ellis: So I’ll say this. The IRS also targets black people more, when it comes to audits. So me personally, being a black man who grew up in Philadelphia, who’s seen, how can I put this delicately? All sides of life, from legitimate to illegitimate. not me, but through my family and other associates and friends. Right. We all know that black folks get targeted and we get the most prison time. Most of us, a lot of the biggest population of prisoners right now are black people. For me, I don’t want no parts of the system, because once you get in, it’s really hard to get out. So for me, I’m, like, straight down the book. I’m for the book because I don’t want no problems at all at, So we know the IRS targets black people way more than they do anybody else. And so while a lot of times it’s not going to bring prison sentences, we just know we have a target on our backs for all things. So, for me, I believe in just doing everything by the book, because when you go through an IRS audit, as long as your paperwork’s together, you will be fine. Nine times out of ten, as long as you didn’t do anything crazy, right? You didn’t take any crazy deductions, you didn’t lie on your taxes, you didn’t dream up any numbers, right? You should be good taxes. It’s kind of boring. People don’t think it’s exciting at all, and I get that, but it could have a devastating impact on your life if you don’t follow the rules.

Tiffany Grant: Absolutely. I know people personally that have been audited, which I’m like, they don’t really make much, or they’re not taking crazy deductions or anything. So I don’t know. I just found it really weird that the people that I’m referring to were getting audited, but they did. And fortunately, they did have their stuff in a row and they were able to get out of it. Okay. But to your point, they were black. And I’m just like, why are they being audited? It’s like an elderly couple.

Camari Ellis: Well, you can get audited a couple different ways, right? And I don’t want to be super bombastic and say, like, the IRS is this big devil, because a lot of people are afraid of the IRS and they should not be. but I get it, because a few years ago, they were very weird. The shenanigans over there with them not stealing homes, but seizing homes, and doing all kinds of other jankiness happened, very rampantly. But now the IRS has been kind of revamped. A lot more regulation around what they do and how they do it is in play. Like, I help a lot of people get out of tax. Like, that’s really my thing that I work on a lot. And so they have all kind of rules that they have to go by now. And if they don’t go by those rules, there’s penalties against the IRS. And they have other, I guess, policy control agencies, one being the taxpayer advocate service. So, like, anytime you get an impasse with the IRS or they’re not complying with their own rules in their own manual, you can go to the taxpayer Advocate service. Again, I don’t want people to be scared, but just like anything else, right? It could be very time consuming. It could be very resource, intensive. Meaning it’s going to cost you some money. A lot of. To be. You just want to, again, like I said, dot your I’s and cross your T’s at all times.

Tiffany Grant: Wait, so you mean to tell me the IRS makes mistakes? Yes, they do.

Tiffany Grant: So let’s talk about tax debt for a minute, too, because I do know quite a few people that have tax debt. and so what are some things that they should do? Like, for instance, I know they need to hire you, first of all, so listen to that. But what are some things that they can do on their own to maybe prepare to work with you, on getting their tax debt together?

Camari Ellis: I mean, here’s the real thing is, when it comes to tax debt, nine times out of ten, the IRS send you a letter, open your letters, read them, like real basic stuff. But I get it. A lot of people have a fear of the IRS. They see these letters, they get anxiety, and they don’t open them. So open your letters, read them, respond to them, call the agencies. Now, a lot of times your tax debt happens on the front end because either you weren’t withholding enough money out of your paycheck, you had a business, and you weren’t paying estimated taxes. All of this stuff. When you’re proactive with your business and your money, you can avoid a lot of these things. But human nature dictates and shows us that most people are not proactive. Listen, even myself sometimes I’m not as proactive as I need to be. So. Right, that’s just human nature. You got to clean up, your mess. And again, that takes being really vigilant and consistent and proactive about getting your stuff in one. You know, just understand what you want to do. But what most people should do is they should set up an IRS account. Everybody talks about credit score, monitoring your credit score. I say everybody should monitor their IRS tax account. To me, that’s more important than your credit score, because just like with credit, if your taxes aren’t together, right. It’s really hard to get a mortgage because a lot of companies look at your tax filings to verify your income. So make sure you have an IRS account and you keep, a record of that, because there are times where IRS tax returns get lost, especially over this last pandemic. People were mailing in mail. I mean, it’s been documented. The IRS had all these lunchrooms full of mail that they didn’t process. They still haven’t gone through all of it. They’ve gone through a lot of it. especially now the IRS has been hiring. However, they still have a backlog. It’s not all together. You know, establish your IRS account, make sure you file your taxes on time. Reason why you want to file your taxes on time, people get jammed up is because, let’s say you do have an IRS debt. If you file your taxes, this is being recorded in 2023. Let’s say you’re filing your taxes now. For 2023, let’s say you owe $100,000 and you filed it. The IRS only has ten years to collect that debt. Now, in the interim of them collecting that debt, they can do a whole lot of things. They can do liens and seizures and all of that. But a lot of times, a lot of those things slip through the cracks. So your statute of expiration doesn’t begin until your taxes are filed. That’s why it’s so important to file your taxes in a timely fashion. And a lot of times, people wait and they delay, and they don’t realize that by not filing their taxes in advance in a timely fashion, they’re kind of jamming themselves up on the back end. And I know that you’re asking which people do, but coming to see me, but I want people to really think about that, like, just get into the mindset of just doing all this stuff on time, because it only helps to work for your benefit in the long run.

Tiffany Grant: okay.

Tiffany Grant: To that point, let me ask a question. When people file for extensions, does that still count? Like, when you say on time, that’s like, by the April deadline, or is that by the extension deadline?

Camari Ellis: Remember, the extension is an extension to file your taxes, not an extension to pay. Just want to put that out there. But once you file an extension, you still have to file your taxes. So I’m talking about actually filing your taxes. So it could be April 15 for your individuals, it could be October 15 when the extension deadline ends. But you just got to make sure you file, because, again, if you file in 2023, you have a tax debt. It’ll fall off on 2033 if it was filed and processed in a timely fashion. And there’s some other technicalities that go into that that might make it last longer, but, for the most part, those are the things you got to think about.

Tiffany Grant: Yeah, that sound like a whole episode, because I know a lot of people that are like, yeah, I’m going to just file an extension. And they don’t even have difficult taxes. But see, it’s not just the extension.

Camari Ellis: Right, it’s the extensIon, and then they did not file because the extension is only for six months after the due date. So we’re going to go with April 15. April 15. Have you filed an extension? You have to October 15 to file. I have clients that I filed extensions for in 2022 are just now coming to me in 2023 getting their stuff together. So if they owe, they’re going to get late filing penalties, late payment penalties, failure to pay penalties. Like, there’s a whole bunch of stuff. So just follow on time to avoid all that.

Tiffany Grant: Amen. You all hear first, Kamari said, file your taxes on time.

Tiffany Grant: now with the penalties, because now that brings up another question. are those, like, a percentage of what’s owed, or are those, like, flat fees? What type of fees have you seen come across just to give people an idea?

Camari Ellis: they’re usually a percentage of what you owe.

Tiffany Grant: Got you. Ah. But they can get there, especially when.

Camari Ellis: You have, like, partnerships and S corps. Everybody’s going crazy. On LLC and Instagram, Twitter, telling everybody to get an S Corp or an LLC, but, they don’t realize that when you file late for those, like for the partnership LLCs, which are due, March 15, if you miss the filing for those, a lot of times it’s thousands of dollars in just penalties. so that’s why people think I’m hating. But I just tell people, just go slow until you are truly ready. Because part of doing business is doing good books and being administratively. What’s the word I’m looking for? Administratively competent. And knowing when your taxes are due is part of being administratively competent. And, Tiffany, you know a lot of people who are not administratively competent?

Tiffany Grant: Oh, yeah. There’s a lot of business owners out there. So if y’all listening and you feel convicted, this is your cue to go ahead and get it together, because, this stuff is important and taxes can take a business out of here. I’ve seen it happen. Yeah, you definitely don’t want that to happen to you.

Tiffany Grant: Now, I want to back up before we wrap up because I had one more qUestion. When you said IRS, probably, but I try to keep these. Can you see them? Can you hear them? but when you said IRS account, this is just a separate, regular bank account, or is this something special just for our audience?

Camari Ellis: It’s not a bank account. It’s just the account. To see what’s going on with your IRS activities, you can go to IRS Gov and usually, there is a, link there that says, check your account.

Tiffany Grant: Gotcha. And this is for personal or both of.

Tiffany Grant: All right, y’all, so make sure you’re checking your IRS tax account. I’m going to go ahead and check mine when I get off the phone because I want to make sure that I’m on track. so, Kamari, like I said, y’all, m, he’s a wealth of.

Camari Ellis: Can I say this real quick?

Tiffany Grant: Please.

Camari Ellis: Another reason why you want to set up your IRS account. Because some of us deal with people who, let’s say they’re not really accountants, they don’t really study the field, but they just go to somebody because they can get them a big refund. By the way, going to someone or working with someone based on the belief that they can get you a bigger refund is trash because a lot of times those refunds are illegal. However, if you do work with somebody like that, you want to log into your IRS account and check it periodically, because sometimes those people don’t. They don’t file their taxes. If you look up ghost preparers. You can just Google it. A lot of times, they won’t sound their names. They don’t have what’s called a P ten. they get a lot of people jammed up because they’re basically janky tax repairs. but you can go in and just kind of monitor and make sure everything’s been filed properly and the IRS got everything.

Tiffany Grant: Child, that sound like a whole nother episode.

Camari Ellis: A lot of people go to the back of the gas station and get their taxes done.

Tiffany Grant: Oh, man. We’re going to have to have you back to talk about that anytime. But for the purposes of this episode, you have been phenomenal, and I have learned. Like I said, y’all, every time I talk to him, I learned so much. So I hope you was taking notes, because this is the goat right here when it comes to taxes. Now, Kamari, if people were interested in finding out more about you, hiring you for services, or following you on social, where could they find you?

Camari Ellis: So you can find me on social at Philly Tax team. Philly Tax team is most of my handles. I’m just now starting a YouTube page. A YouTube page, Ig. I don’t do much on my Twitter, but you can also find me at the finance Rebel. The finance Rebel. That’s my main page.

Tiffany Grant: Yes. And I follow Kamari, and he puts out really great content and, educates on all of this and more. And especially if you’re interested in learning more about black wealth and racial, wealth gap issues, things of that nature. Highly recommend a follow to him because he puts out a lot of information, and it’s so good. So thank you so much, Kamari, for being on the show today, and I’ll make sure I have all of that information in the show notes. I appreciate you so m much. just thank you.

Camari Ellis: Thank you, Tiffany. I am super appreciative, and I’m a big fan of your work. So again, I am honored that you asked me to be on your show. Thank you.

Tiffany Grant: No problem. Thank you. Have a good one. Bye.

Camari Ellis: You too.

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