Tax pros warn against following terrible tax tips circulating on TikTok
As tax day approaches, TikTok creators are dolling out filing tips, including suggestions about what kinds of purchases to write off. But financial professionals caution against following advice proliferating on the social media platform that might be unsound.
Among the most visible, but flawed pieces of advice are claims that taxpayers can write off their pets as business expenses, or hire one's own kids for a tax refund.
The Internal Revenue Service has also cautioned taxpayers against interpreting dubious social media advice as legitimate, saying that following wrong advice could potentially lead to fines.
"The IRS warns taxpayers to be wary of trusting internet advice, whether it's a fraudulent tactic promoted by scammers or it's a patently false tax-related scheme trending across popular social media platforms," the agency said.
Mara Derderian, a professor of finance at Bryant University, said that while it is good that social media creators are engaging young people in the topic of finances, it's important for users to be aware of whom they're taking advice from.
"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 told CBS MoneyWatch. "Everybody has unique goals, and your advice should be customized."
Here are three pieces of tax advice circulating on TikTok from so-called "finfluencers," or financial influencers, that experts say to be wary of following.
1. You can claim your car as a business expense
While a car can be a legitimate business expense, taxpayers don't have license to buy new vehicles and automatically write them off. For starters, you have to be able to prove that you do in fact use it to conduct business. One way to do this is to keep a mileage log and tally it up at the end of the year.
"You can keep track of mileage and if you happen to have a year where you use the car more for personal than business, you can't deduct it for that year. So that's the 'gotcha,'" said Dallas-Fort Worth-based certified financial planner Katie Brewer.
2. You can hire your kids and deduct their salaries
Again, parents can legitimately employ their own children, but their kids have to actually be doing a job that's necessary to running a business in order for their wages to be claimed as a business expense. "This one comes up a lot, and I tell people they have to actually be doing something, and you have to pay them through payroll. You can't just dole out an allowance," Brewer said. "Keep track of what they're doing on a time sheet in case anyone gets audited. That will serve as proof that you're not just throwing money at your children for no reason."
Also, deducting a $4,000 salary for your 9-month-old who you claim is a model, is another example of a disingenuous deduction that is likely to raise red flags with the IRS, according to Terrance Hutchins, a Frisco, Texas-based certified financial planner.
"You wouldn't pay them that much for one photoshoot, that's not really reasonable," he said.
3. You can claim your pet as a guard dog
Brewer said she's fielding more queries from clients about whether they can claim their pets as guard dogs, citing advice on TikTok. The answer in most cases is no.
"Unless you are a dog groomer, dog trainer or have a therapy pet and use it because you do counseling, pets are most likely not likely to be written off," she said. "If you work from home and have a pug that hangs out and occasionally barks out your window, no, it's not going to pass muster."
Megan CerulloMegan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News Streaming to discuss her reporting.
