Don’t fall for social media myths
Social media like TikTok have had a massive influx of “finfluencers” (finance influencers) who are providing tax tips and hoping to get their next viral hit. Almost anyone can publish almost anything on any platform. The problem is that people often believe the advice they see on social media. Taking advantage of myths that you see on social media can cause you to have major problems with the IRS.
“Social media has created an ecosystem of misinformation and half-truths,” says Kenesha Coleman, CPA, and certified tax coach. “Influencers spew financial and tax advice without any practical experience, credentials, or formal training and the public is eating it up it gives them hope of getting rich quick.”
“The problem with the various tax tips, tricks and strategies you hear on social media is not that they are completely wrong, but rather they are built on a kernel of truth that is then extrapolated in ways that, if used, could cause a taxpayer to run afoul of the IRS,” says Jason Cherubini, CPA MBA.
Below are some of the common myths:
If you write off $500 in business expenses, you’ll save $500 on your taxes
Tax deductions don’t provide you with a dollar-for-dollar refund. They lower your taxable business income. The amount of the savings depends on your tax bracket.
You need an LLC to claim write-offs
The truth is that all you need to claim a write-off is to prove that your company is an actual business. The IRS determines whether you have a business by your records, depending on the income from your business and whether you have non-monetary motives behind your activities. Forming an LLC could require unnecessary expenditures if the LLC isn’t beneficial.
You can choose an expensive vehicle to go to work and deduct its full cost the first year it’s used
The problem with this myth is that there is only a little bit of truth. Employee business expenses were eliminated with the 2018 tax changes. Vehicle expenditures can only be deducted as a business expenses. There are limits on the amount a vehicle can be expensed during the year of purchase, depending on whether it is a car, SUV, or truck.
People who rely on their appearance for work can write off appearance-related expenses
It’s very difficult to convince the IRS to write off clothing, makeup, and cosmetic surgery. The IRS has an Entertainment Audit Technique Guide, which state: No deduction is allowed for wardrobe, general makeup, or hair styles for auditions, job interviews, or to maintain an image.
Don’t accept tax advice on social media even if a licensed tax professional provides it. Anyone can claim to be a licensed professional. Find an attorney, CPA, or Enrolled Agent you trust for tax advice.
David Zubler is a tax accountant in East Tennessee, the author of three books, and a philanthropist. All of his proceeds from the books go to a charitable foundation he created for underprivileged children. He is also the founder of Your Tax Care which provides tax education. David can be reached for questions and consultation at yourtaxcare.com.