TikTok logo displayed on a cellphone.Hyoung Chang | Denver Post | Getty Images
With consumers turning to social media for financial information, tax advisors are often battling misinformation spread by influencers on popular platforms like TikTok.
Nearly 80% of millennials and Gen Zers have used social media for financial advice, according to a 2023 Forbes Advisor survey of more than 1,000 American adults. Some 32% of respondents cited TikTok as a preferred platform for financial information.
“It’s a wealth of horrible information,” said Josh Youngblood, an enrolled agent and owner of The Youngblood Group, a Dallas-based tax firm.
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Some clients are making tax decisions based on tips received from TikTok videos, which can range from 15 seconds to three minutes long — without discussing it with their tax advisor — who may later have to “unwind” or fix mistakes, according to Youngblood.
“We can almost always tell when there is some new TikTok trend because a lot of us start getting the same questions from our clients,” he said.
TikTok videos often have a ‘kernel of truth’
One big issue has been the flood of influencers pushing small businesses to amend payroll tax returns to claim the employee retention credit, or ERC, a pandemic-era tax break, according to Matt Metras, a Rochester, New York-based enrolled agent and owner of MDM Financial Services.
Worth thousands per eligible employee, the IRS recently halted processing for new amended tax returns claiming the ERC amid a surge of “questionable claims.”
Most of the videos on TikTok have a kernel of truth to them, but they’re embellished or it only makes sense in very specific situations.Matt MetrasOwner of MDM Financial Services
Other misleading videos have included tips to form a limited liability corporation, or LLC, to deduct personal expenses, or telling all business owners to hire their children to deduct the wages and create the “earned income” needed to fund Roth individual retirement accounts for kids.
“Most of the videos on TikTok have a kernel of truth to them, but they’re embellished or it only makes sense in very specific situations,” Metras said. “But when you have a 60-second video, you aren’t trying to convey that nuance.”
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Whether you’re receiving tax information from TikTok, YouTube, Facebook or another social media platform, experts say it’s important to verify information before taking action, experts say.
Youngblood said it “becomes really sad” when someone takes incorrect advice from social media, the IRS flags their return and they owe taxes and penalties. Before making a costly mistake, he recommends talking to a tax professional “before you do anything,” he said.