Don’t Try This at Home

Fire up your smartphone, open any social media app, and prepare yourself to be barraged by dumb people doing dumb things. Just Google “deadliest TikTok challenges,” and you’ll find an all-you-can-eat buffet. Basting a chicken in NyQuil before baking? (Why?) The “Benadryl challenge” that killed a 15-year-old Oklahoma girl? The “choking challenge” that’s been linked to over 20 deaths?

“But surely,” you say, “the people posting tax advice on social media apps are different. They’re trained professionals with nothing but my best interests in mind!”

You weren’t born yesterday, were you? (Were you?) Let’s take a look at some of the skibidi, sus, and just plain bad tax advice floating around on social media.

There’s a video circulating on Instagram where a sales trainer and real estate investor excitedly reveals how you can write off 100% of the cost of your truck. You can wait until December 31 to buy it, and you don’t even have to drive it to deduct it. Sounds great, right?

Well, it shouldn’t surprise you to learn the video leaves out a couple of important points. First, you can write off 100% of the cost only if you use it 100% for business. So much for driving it zero miles—if there’s no business use during the year, there’s no deduction! If you don’t have a business, or your business isn’t making money, you’re out of luck. Also, much of your savings is really just a loan—when you sell the truck down the road, you’ll owe tax on part of your proceeds.

There’s another video out there where a narrator tells you two things you need to do immediately when your child is born. The first is to pay them annually $12,000 federal-tax-free to pose for photos on your family business website; the second is to deposit $6,500 of it into a custodial Roth IRA. ($12,000 was the standard deduction for a single taxpayer, and $6,500 was the Roth contribution limit back when the video was recorded.)

Hiring your kids to shift income from your high tax rate to their 0% tax rate is a long-established strategy. But IRS rules require their salary to be “reasonable compensation” for the work they perform for the business. And who’s to say those photos are worth $12,000 when you can license perfectly acceptable stock photos of smiling babies for less than the cost of a box of Pampers? How much cuter is your kid . . . really?

Finally, there’s a TikTok video with a narrator interviewing a “man on the street” who just happens to be sitting in the driver’s seat of a stylish cream-colored Ferrari. The narrator discovers our driver is a consultant who made over $7 million that year, who pays no tax, and who used the savings to buy the Ferrari. The narrator asks the tax-free driver for the best financial advice he’s ever received – and the driver responds with something called the “Augusta Rule.” Now, that’s a terrific strategy for renting your home to your business for up to 14 days per year to avoid tax on some of your business income. But it rarely saves more than a few thousand dollars per year unless you’re living in Stately Wayne Manor. It’s not even a rounding error for someone making $7 million.

Go ahead and have fun scrolling through any tax videos that pop up on your social media feed. But you already know to take what you see with a pretax-sized grain of salt. Send them to us before you act. Maybe there’s some truth in that strategy. More likely, we’ll have a laugh sharing them with our tax pro friends!

Call (562) 281-1040 or email to [email protected] .