Social media tax advice can be misleading and lead to fraud. That’s the crux of a new IRS tax warning about the dangers of following certain financial advice on social media. This latest warning is part of the agency’s “Dirty Dozen” tax scams campaign, and comes as recent data show that 80% of young adults, including Gen Z, get most of their financial advice from platforms like YouTube, Reddit, and TikTok.
New IRS Commissioner Danny Werfel acknowledged in a statement that there are a lot of ways to get good tax information, but added, “people should be incredibly wary about following advice being shared on social media.”
Accounts promising things like “secret” ways to fill out a form to get a larger tax refund for example, can be found using hashtags that are popular during tax filing season like #taxes and #taxtips. Commissioner Werfel says that many of these social media tax claims are inaccurate and sometimes fraudulent, which can get honest taxpayers into trouble with the IRS.
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Some recent examples of bad tax advice circulating on social media involve hardship waiver forms and W-2 fraud. Kiplinger has reported on the W-2 tax scam on social media, which encourages people to fill out Form W-2 with false information. The idea is that you include fake information, including a large amount of withholding and income, to eventually file a fake W-2 to try and get a big tax refund from the IRS.
The IRS says that it is actively watching for false W-2s, as are many states and some tax industry partners.
What is Form 8944?
Other social media accounts tell people to fill out IRS Form 8944, which is an e-file request for a hardship waiver. Some people on social media say that you can use this form to get a tax refund from the IRS even if you aren’t due a refund. Unfortunately, that claim is false.
Form 8944 is actually used by some tax preparers so that they can file certain tax returns electronically rather than on paper. Ordinary taxpayers cannot use Form 8944 as a secret way to get a larger refund or a refund that they aren’t entitled to. The IRS warns that using Form 8944 in a fraudulent way can lead to civil and/or criminal penalties.
Not all financial or tax advice on social media is misleading or fraudulent, which can be challenging for the millions of young adults who get most of their financial information from social media platforms.
According to a recent study, nearly 80% of people surveyed who consider themselves to be Gen Z or millennial, get financial advice from social media. Some key findings of the study were that:
- 62% of respondents were empowered by social media access to finance-related information,
- YouTube and Reddit were among the most trusted platforms for social media financial advice,
- TikTok was also a popular source of finance advice and information, and
- only 31% of respondents said that they check the qualifications of the people who are posting the social media advice.
There are social media accounts that provide accurate information about how to legitimately use the tax code to your advantage. But the IRS says that if something seems too good to be true with social media tax advice, it probably is. If you’re unsure, you can verify tax information that is circulating on social media platforms by checking the IRS’ social media accounts.
And, if you’re looking for good ways to reduce your taxable income and lower your tax burden, check out some often overlooked tax deductions, credits and exemptions.