You can find anything on TikTok, from book reviews to sex education classes. So it’s no surprise that some people come to the app for tax advice. Just try not to be one of those people.
Washington Post reported this week that “bad tax advice is multiplying on TikTok,” with accountant-influencers (or superficial “financial experts” who don’t have any credentials) allegedly revealing the secret money-saving plans of the one percent.
The item matches a warning of the IRS about “wildly inaccurate” tax advice that was spread via social media ahead of the April 15 filing deadline. Anyone who falls for these so-called “tax tricks” could submit inaccurate information, which can lead to fines or penalties.
You may not need to be a CPA to know that it’s a bad idea to follow TikTok advice like “buy a boat and pay it off” or “claim your pet as a work expense.” But the Guardian approached a couple of chartered accountants anyway.
“The United States tax code has been considered one of the most complicated tax codes in the world,” said Dan Henn, a certified public accountant in Rockledge, Florida. “If most Americans can’t understand it, how do you know someone on TikTok will?”
Henn added that TikTok was just the latest source of terrible tax information. “It’s the same thing I tell people who get advice from their brother-in-law or their uncle or their best friend: They may be right, but they may only be partly right,” he added.
Now is the time to debunk the worst TikTok tax myths, most of which irresponsibly encourage people to claim large personal expenses as business deductions.
MYTH: Start a side business (no one cares what) and create an LLC. As a new business owner, you can cancel charges for your cell phone, computer, internet, and anything “related to your work.”
REALITY: Henn said this was not necessarily bad advice – simply incomplete. It’s true that starting an LLC can help you deduct expenses, but the business has to be legitimate and there are rules. The IRS differentiates between a “real” endeavor and a hobby, and expects taxpayers to keep accurate accounting.
“You can start a business, and just because you make a few dollars, that doesn’t give you the right to deduct your entire cell phone from the theoretical amount of money you’re going to make,” said Paul Miller, a New York-based certified public accountant. . , he told The Guardian.
MYTH: Buy a boat or a truck and get rid of it, baby! Mike Poarch, a content creator who also runs a company that sells stock market courses, said in a recent video that his $70,000 truck had saved him “over $21,000” on his taxes. He cancels his gas, insurance, maintenance and upgrades. The same goes for his new boat.
REALITY: Apologies to aspiring yacht owners, but this is not good financial advice. Although Poarch could Getting away with it since he uses both vehicles for content creation (aka his job), Miller said was difficult for most people.
“[Influencers] They just want attention and they’ll get it by saying, ‘I wrote off my car,'” he said. “There is a provision in the law that allows a truck to be deregistered, but there are obstacles: is the car used exclusively for business? No accusations of personal use? And do you have a real business?
Henn added that boats and motor homes were especially difficult to cancel, but there were exceptions for people who actually use theirs for business. “A simple example is if you’re a guy who charters fishing and you take people on a boat pretty regularly and you can document it,” Henn said. “I’ve advised people to scrap their boats, but they just have to document them. You have to document when you use it, what date and time, and why you are using it. The law requires it. That accurate information is a kind of get-out-of-jail-free card.”
CEOs take note: the IRS announced last month that plans to crack down on corporate jet users who abuse the tax code and claim millions of dollars as deductions on personal travel.
When contacted by the Washington Post, Poarch admitted that his TikTok could have been embellished: “Sometimes these videos make him seem a little more upbeat than he really is, but that’s to help with virality.”
MYTH: It’s easy to include your pet on your taxes as a work expense. For example, use your Doberman as a guard dog at work. Now you can pay off his food, grooming expenses, vet bills or training costs.
REALITY: Miller said this could work in certain cases, but it had to be a very compelling story. After all, you are reporting to the IRS, not the ASPCA.
One of Miller’s clients runs a pediatric dentist practice and brings his personal dog to the office to calm the children. That’s a legitimate business use for the dog, but that doesn’t mean he can write off all the expenses for it.
“What happens when you bring the dog home from work? Are you deducting all the dog food or the price of the dog walker? Miller said. “If she cancels 50% of her food to cover when the dog is in the office, that makes logical sense to me. But deducting 100% of everything can be a bit obscene. This is what we mean when we talk about crazy deductions.”
And you certainly You cannot rule out your pet as a dependent.
MYTH: Taxes are voluntary and you don’t actually have to spend your one precious life paying them. Be free.
REALITY: Today’s TikTok youth may be too young to remember, but Wesley Snipes was sentenced to three years in federal prison for tax evasion after trying to argue against the legitimacy of income taxes. It didn’t work for him and it won’t work for you either. “Anyone who decides to follow this advice is setting themselves up for a world of pain,” Henn said.