When it comes to managing your finances and taxes, it’s important to be cautious about the advice you find on TikTok. While certain tax “loopholes” may go viral on the platform, it doesn’t mean they’re suitable for your specific tax situation. TikTok’s bite-sized videos often oversimplify complex tax strategies, leading to misinformation. Blindly following this advice can result in penalties, back taxes owed, and a lot of hassle.
Let’s take a closer look at some questionable TikTok tax advice and how you can ensure it doesn’t mislead you and your money.
Hiring your kids:
Some TikTok 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.” While it’s true that only earned income can be contributed to a Roth IRA, there are specific requirements for hiring your kids. The work they do must be legitimate and age-appropriate, and the pay must be reasonable for the job performed. Simply putting your children on payroll as a tax workaround could be considered fraud.
Hiring your dog:
There are TikTok videos that claim you can write off your pet as a guard dog who protects your business. While it’s true that guard dog expenses are deductible if the dog is trained and of a breed fit for the job, trying to deduct your corgi for occasionally barking at the door won’t fly with the IRS.
Writing off your Range Rover:
Another viral claim on TikTok suggests that you can write off the cost of a luxury vehicle like a Range Rover or Mercedes-Benz G-Wagon on your taxes. However, the truth is that businesses may be able to write off a G-Wagon if it’s used for business purposes at least half of the time, according to the IRS Section 179 tax code. There are strict requirements and limits on the deductible amount for luxury vehicles.
Forming an LLC to deduct personal expenses:
While this advice seems to be falling out of fashion, there are still TikTok videos that claim you can form an LLC to deduct personal expenses like your mortgage, car payments, and grocery bills as business expenses. While LLCs can provide some tax benefits, simply forming one doesn’t automatically allow you to write off all your personal costs. There are specific rules about what qualifies as a legitimate business expense, and deducting personal expenses improperly can get you in trouble with the IRS.
The bottom line is that when it comes to complex topics like taxes, it’s best not to rely on brief videos from non-professionals. Instead, consult a qualified tax professional who can provide you with legitimate, tailored advice based on your specific situation. What makes for a good viral video rarely translates to good tax planning.
