TikTok Tax Myths DebunkedShare this post
TikTok Tax Myths Prove This is Not the Place for Tax Advice
According to a report commissioned in 2021, one in seven videos from TikTok finance influencers is misleading. TikTok tax myths are rampant. Remaining critical about the content found online is crucial especially when it concerns personal finances. Every tax season, nearly 60 million US contractors, freelancers, and gig workers gear up to file their taxes. Self-employed workers often turn to the internet for help. Five of the most troubling TikTok tax myths affecting self-employed workers are identified here:
Myth #1: If you write off $500 in business expenses, you’ll save $500 on your taxes.
It’s true that tax write-offs can decrease your final tax bill. However, deductions don’t lessen your tax bill dollar-for-dollar. Instead, they lower the amount of money you’re taxed on. Creators fail to clarify the distinction between lowering your tax bill and lowering your taxable income when they talk about specific expenses.
Myth #2: People who rely on their appearance for work can write off appearance-related expenses.
Writing off appearance-related expenses is pretty difficult to pull off in the eyes of the IRS. Essentially, taxpayers have to prove that their appearance-related expenses are only good for their business, not for their personal life. Rule of thumb: If it’s suitable for everyday use, it’s not a write-off.
Myth #3: Lifestyle influencers can write off “lifestyle expenses,” like clothing hauls or home decor.
As with appearance-related write-offs, this myth speaks to the importance of separating personal and business expenses. Plenty of influencers’ businesses are tightly interwoven with their personal lives, which means figuring out write-offs can be confusing. The IRS requires that write-offs be “ordinary and necessary” for your business. Their Audit Technique Guide takes a pretty narrow view of what entertainers can write off.
Myth #4: You need an LLC to claim write-offs.
This one’s just false! You absolutely do not need an LLC to claim write-offs. You’ll just need to make sure that your business is an actual business (as opposed to a hobby that sometimes earns you extra cash). In truth, LLCs aren’t a necessity for everyone. If you make $80,000 or less per year in 1099 income, an LLC might not even be that helpful.
Myth #5: Think you might want a Hummer to use for work? This myth says you can deduct its full cost the first year it’s in use.
It refers to Section 179, a portion of the tax code that lets you deduct the purchase price of a business vehicle if it meets certain requirements. These requirements are the vehicle must weigh between 6,000 and 14,000 pounds and be used 50% or more for work. The truth is you CAN deduct vehicles that meet these requirements under Section 179 however, you can only deduct the business-use percentage of any purchases. Also, if you take a Section 179 deduction on a vehicle, you can never use the standard mileage rate to deduct expenses related to that vehicle again or write off depreciation on the car in future years. Basically, you might save money now, but your tax bills will be higher in the long run.