As tax day approaches, TikTok creators are sharing filing tips, offering advice on what expenses to deduct. However, financial experts are warning against following potentially risky suggestions circulating on the platform.
Some of the most prevalent but misguided tips include the idea of writing off pets as business expenses or hiring one's own children for tax benefits.
The Internal Revenue Service has issued a warning to taxpayers about the dangers of relying on questionable social media guidance, emphasizing that inaccurate advice could result in penalties.
"The IRS cautions taxpayers to exercise caution when considering online recommendations, whether they are deceptive tactics promoted by fraudsters or blatantly false tax schemes gaining traction on popular social platforms," the agency stated.
Mara Derderian, a finance professor at Bryant University, acknowledged the value of social media influencers sparking financial conversations among the younger generation. However, she stressed the importance of being discerning about the sources of financial advice.
"Social media is a great conversation starter, and from there you need to make sure you're seeking tax-related or other advice from an educated, experienced professional," she advised. "Everybody has unique goals, and your advice should be customized."
Below are three tax tips making the rounds on TikTok from self-proclaimed "finfluencers," or financial influencers, that experts caution against following.
1. Claiming your car as a business expense
While using a car for business purposes can be a valid expense, taxpayers cannot simply purchase a new vehicle and deduct it automatically. It is essential to prove that the car is indeed used for business activities. One way to do this is by maintaining a mileage log and calculating the total at the end of the year.
"Keeping track of mileage is crucial, and if during a year the car is predominantly used for personal reasons, you cannot claim it as a deduction for that year. That's the 'catch,'" explained certified financial planner Katie Brewer based in Dallas-Fort Worth.
2. Creative Tax Deductions: Thinking Outside the Box
Looking for ways to maximize your tax deductions? Consider these unconventional strategies:
- Hiring Your Kids: Parents can hire their children for legitimate business tasks and deduct their salaries. Make sure the work is necessary for the business and keep detailed records to support the deductions.
- Pet as a Guard Dog: While it may sound tempting to claim your pet as a guard dog, the IRS is unlikely to approve this deduction unless the pet is actively used in a business capacity, such as for security services or therapy.
Remember, when claiming deductions, it's important to stay within the boundaries of what is considered reasonable and necessary for your business. Consult with a tax professional for guidance on maximizing your deductions while staying compliant with tax laws.
