Four TikTok-Endorsed Tax Strategies to Disregard
In the realm of managing your finances and taxes, it's crucial to approach advice found on TikTok with caution, sprinkling a generous helping of skepticism on top. While certain videos seem to share "loopholes" or strategies, remember that what works for one person may not be applicable in your situation. The platform's bite-sized videos tend to oversimplify complex tax strategies, leading to misinformation. Blindly following this advice could result in expensive penalties, back taxes, and an overwhelming amount of trouble.
Let's delve into some of these questionable TikTok tax advice and ensure they don't lead you astray.
with a hefty grain of salt. Certain
Employing your kids
tax "loopholes" may go viral, but that doesn't mean they're good for your specific tax situation. TikTok's bite-sized videos have a habit of distilling nuanced tax strategies into just a few sentences—a recipe for misinformation. This advice is lightly misleading at best, and totally inaccurate at worst. Blindly following this advice could
Some TikTok videos suggest that business owners benefit from employing their kids to contribute to a Roth IRA using "earned income." While it's accurate that only earned income is eligible for Roth IRAs, hiring your kids includes specific requirements. The work they perform must be legitimate and age-appropriate with reasonable pay for the job. Simply placing your children on payroll as a tax loophole could be considered fraudulent.
cost you in penalties, back taxes owed, and a tremendous hassle.
Hiring your dog
Some videos suggest that business owners should hire and pay their children as employees. The claim is that this allows the child to contribute to a Roth IRA using their "earned income."
I've come across videos claiming that you can write off your pet as a guard dog protecting your business, thanks to guard dog expense deductions. Although it's true that guard dog expenses are deductible if the dog is trained and properly qualified, trying to claim your corgi as a guard dog for occasional barking at the door isn't going to get you far with the IRS.
videos like this one garner hundreds of thousands of likes for the claim that you can write off your pet as a guard dog who protects your business. It's true that
Claiming your Range Rover as a deductible expense
guard dog expenses are deductible if the dog is trained and of a breed fit for the job. Unfortunately, trying to deduct your corgi for occasionally barking at the door isn't going to get your very far with the IRS.
Another popular TikTok claim pertains to writing off the cost of a luxury vehicle like a Range Rover or Mercedes-Benz G-Wagon on taxes. The truth is, according to the IRS Section 179 tax code, businesses can potentially write off some or all of the cost if used for business purposes half of the time. However, there are strict requirements and limits on the deductible amount for luxury vehicles that exceed a certain threshold.
about a legal "tax loophole" advises people to write off the cost of a luxury vehicle like a Range Rover or Mercedes-Benz G-Wagon on their taxes.
Forming an LLC to deduct personal expenses
IRS Section 179 tax code,
This is a fading trend, but some older videos advise forming an LLC to deduct personal expenses like mortgages, car payments, or groceries. Forming an LLC can provide some tax benefits, but it doesn't automatically allow you to write off personal expenses. There are stringent rules about legitimate business expenses, so improper deductions could lead to penalties with the IRS.
videos like this one make the rounds. Creators claim you can form a limited liability company (LLC) to deduct personal expenses like your mortgage, car payments, and even grocery bills as business expenses to reduce your taxes.
In conclusion, when it comes to tax-related topics or any complex topic, rely on advice from credentialed tax experts rather than brief videos from non-professionals. Inept tax strategies could inadvertently cost you more in penalties, interest, and fees in the long run. Unless a TikTok video comes from a licensed tax professional discussing general topics, take it with a grain of salt. It is always best to consult a qualified tax professional who can provide tailored advice based on your specific situation.
consult a qualified tax professional who can look at your specific situation and give you legitimate, tailored advice. What makes for a good viral video rarely translates to good tax planning.
- It's essential to be wary of TikTok's 'tiktok tax advice' regarding employing your kids to contribute to a Roth IRA, as this strategy may involve specific requirements to avoid penalties and back taxes.
- The viral claim about writing off the cost of a luxury vehicle like a Range Rover or Mercedes-Benz G-Wagon on taxes is misleading. According to the IRS Section 179 tax code, businesses can potentially write off some or all of the cost if used for business purposes half of the time, but there are strict requirements and limits.
- Forming an LLC to deduct personal expenses like mortgages, car payments, or groceries is a fading trend promoted in some outdated TikTok videos. It's important to remember that improper deductions could lead to penalties with the IRS, and it's always best to consult a qualified tax professional for tailored advice based on your specific situation.
