TikTok Tax Scam: Misleading Videos Spark IRS Concerns

Viral TikTok videos are circulating false information, advising Americans to evade tax payments by wrongly declaring themselves exempt from tax withholdings. These videos assert that choosing “exempt” on IRS Form W-4 can lead to zero-dollar tax withholding, urging viewers to contact their employers to request this change, falsely assuring compliance.

The deceptive videos propagate the misconception that avoiding tax withholdings equates to not paying taxes, a fallacy that can result in severe consequences for taxpayers who follow such advice, as emphasized by Ahad Ali, a certified public accountant (CPA) and CEO of Ahad&Co based in New York City.

Ali warns that falsely claiming “exemption” on a W-4 does not grant individuals the ability to bypass federal taxes, contrary to the misleading implications in the videos. In reality, taxpayers would be obligated to repay all taxes owed during the filing season, potentially incurring penalties and interest.

The prevalent use of TikTok, particularly among millennials, Gen Z, and Gen Alpha, has seen an influx of misguided financial advice. Taxpayers are urged to exercise caution, as these misleading videos may have serious financial repercussions.

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CPA Warns of Misleading Videos on Tax Avoidance

tiktok-tax-scam-misleading-videos-spark-irs-concerns
Viral TikTok videos are circulating false information, advising Americans to evade tax payments by wrongly declaring themselves exempt from tax withholdings.

Within the TikTok community, self-proclaimed financial “gurus” share videos with enticing captions, such as “how rich people write off their dogs on taxes” and “how you can be non-taxable.” Greg Kling, a CPA and associate professor at the USC Leventhal School of Accounting, highlights the unfortunate nature of these videos, emphasizing the confusion they bring to an already complex area of law.

What these TikTok experts fail to mention is the relevance of taxpayers settling their entire tax bill in April if they choose not to have tax withholdings throughout the year. It’s crucial to pay on time to avoid penalties and interest on any unpaid balances, highlighting the significance of receiving sound financial guidance.

Ahad Ali emphasizes that the tax that wasn’t deducted throughout the year due to a claimed exemption becomes due during tax season, potentially leading to higher payments due to penalties and interest.

The IRS holds the authority to pursue taxpayers who neglect to file returns and may charge those engaged in serious delinquencies with tax evasion, a criminal offense carrying fines and imprisonment.

Ahad Ali underscores the severity of these consequences, stating, “All these aggressive collection actions can come into play. If you don’t pay in full, make plans to pay, or go into a payment agreement [with the IRS], then it can levy your bank account, garnish your paycheck.” Taxpayers are urged to seek accurate financial guidance and exercise diligence to avoid falling victim to misleading information.

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