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You can find hacks for just about anything on TikTok, but you can’t trust all of it. While the stakes are low if it’s a recipe or a beauty tip, one area you may want to be wary of is anything related to managing your finances and taxes. Some tax “loopholes” may go viral, but taxes are complicated, and condensing strategies into a few sentences can easily lead to misinformation.
Following tax advice from TikTok could end up costing you in penalties, back taxes owed, and a huge hassle. These are some TikTok tax “hacks” you’re better off ignoring.
- Hiring your kids - According to some videos, business owners should hire and pay their employees so the child can contribute to a Roth IRA with their “earned income.” The thing is, there are very specific requirements when it comes to hiring your kids. They have to do legitimate, age-appropriate work and receive reasonable pay for it and just putting your kids on the payroll as a tax workaround could even be considered fraud.
- Hiring your dog - Videos like this one claim you can write off your pet as a guard dog who protects your business. While it’s true that if a dog is trained and the right breed for the job, guard dog expenses are deductible, the IRS doesn’t let you deduct your corgi for barking at the door occasionally.
- Writing off your Range Rover - You may have seen this viral claim about a “tax loophole” that lets people write off the cost of a luxury vehicle on their taxes, but it’s not that simple. According to the IRS Section 179 tax code, businesses can write off a vehicle that’s used for business purposes at least half of the time. But it doesn’t allow them to deduct the full cost of the vehicle the year it’s put into service and there are strict limits on the deductible amount for luxury vehicles.
- Forming an LLC to deduct personal expenses - Some older videos like this one claim that by setting up a limited liability company (LLC), you can deduct personal expenses like your mortgage, car payments and grocery bills as business expenses to lower your taxes. The truth is that LLCs can offer some tax benefits, but you can’t magically write off all your personal expenses and the IRS has strict rules for what qualifies as a legitimate business expense.
Source: Lifehacker