You can find anything on TikTok from book reviews to sex education classes. So it’s unsurprising that some people hit up the app for tax advice. Just try not to be one of those people yourself.
The Washington Post reported this week that “bad tax advice is multiplying on TikTok”, with accountants-slash-influencers (or sketchy “financial experts” who boast absolutely no credentials) supposedly revealing the one per cent’s secret money-saving schemes.
The article coincides with a warning from the IRS about “wildly inaccurate” tax advice spreading via social media ahead of the 15 April filing deadline. Anyone who falls for these so-called “tax hacks” could potentially submit inaccurate information, which may lead to fines or penalties.
It might not take a CPA to know that it’s a bad idea to heed TikTok advice such as “buy a boat and write it off” or “claim your pet as a work expense”. But the Guardian approached a couple of CPAs anyway.
“The US tax code has been called one of the most complicated tax codes in the world,” said Dan Henn, a certified public accountant from Rockledge, Florida. “If most Americans can’t get it, how do you know that someone on TikTok will?”
Henn added that TikTok was just the latest source for terrible tax information. “It’s the same thing I say to people who get their 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 it’s time to debunk TikTok’s worst tax myths – most of which irresponsibly encourage people to claim big personal expenses as business deductions.
MYTH: Start a side hustle – no one cares what – and take out an LLC. As a new business owner, you can write off your cellphone charges, computer, internet and anything that “relates to your work”.
REALITY: Henn said this wasn’t necessarily bad advice – just incomplete. It is 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 it expects taxpayers to maintain accurate bookkeeping.
“You might start a business, and just because you make a few dollars, that doesn’t entitle you to deduct your entire cellphone against the notional amount of money you’re going to make,” Paul Miller, a New York-based CPA, told the Guardian.
MYTH: Buy a boat or truck and write it off, baby! Mike Poarch, a content creator who also runs a company that sells courses about the stock market, said in a recent video that his $70,000 truck had saved “more than $21,000” on his taxes. He writes off his gas, insurance, maintenance and upgrades. Ditto for his new boat.
REALITY: Apologies to aspiring yacht owners, but this is not sound financial advice. While Poarch might get away with this, as he uses both vehicles for content creation (AKA his job), Miller said it was difficult to swing for most folks.
“[Influencers] just want attention, and they’ll get it by saying, ‘I deducted my car,’” he said. “There is a provision in the law that allows you to write off a truck, but there are hurdles: is the car exclusively used for business? Are there no personal use allegations? And do you have a real business?”
Henn added that boats and RVs were especially tricky to write off, but there were exceptions for people who genuinely use theirs for business. “An easy example is if you’re a charter fishing guy who takes people out on a boat pretty regularly and can document that,” Henn said. “I have advised people to write off their boats, but they just have to document the crap out of it. You have to document when you use it, what date and time, and why you’re using it. The law requires it. That accurate information is sort of your get-out-of-jail-free card.”
CEOs, take note: the IRS announced last month that it plans to crack down on corporate jet users who abuse the tax code and claim millions of dollars as deductions on personal trips.
When reached by the Washington Post, Poarch admitted that his TikTok might have been embellished: “Sometimes these videos make it appear a little more rosy than it may actually be, but that’s to help with virality.”
MYTH: It’s easy to claim your pet on your taxes as a work expense. For example, use your doberman as a guard dog at work. Now, you can write off his food, grooming expenses, vet bills or costs of training.
REALITY: Miller said this might work in certain cases, but it had to be a very convincing story. You’re reporting to the IRS, after all, not the ASPCA.
One of Miller’s clients runs a pediatric dentist practice and brings her personal dog into the office to calm the kids down. That’s a legitimate business use for the dog, but that doesn’t mean that she can write off all of its expenses.
“What happens when she takes the dog home from work? Is she deducting all of its dog food, or the price of the dog walker?” Miller said. “If she writes off 50% of its food to cover when the dog’s in the office, that makes logical sense to me. But deducting 100% of everything might be a little obscene. This is what we mean when we talk about crazy deductions.”
And you certainly cannot write your pet off as a dependant.
MYTH: Taxes are voluntary and you actually don’t have to spend your one wild and 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 attempting to argue against the legitimacy of income taxes. It didn’t work for him, and it won’t for you, either. “Anyone who chooses to follow this advice is setting themselves up for a world of hurt,” Henn said.