A recent report, which surveyed 2,000 Gen Zers between 18 and 26 in the U.S., found that 70 percent were using TikTok to seek career and business advice. This video-sharing platform began as a forum for sharing dance moves and acapella performances but has now evolved into a hub for financial and business guidance.

However, like the rest of the internet, with vast information and an assortment of sources, TikTok can be a melting pot of both sound and unreliable information. A new report by Paxful, which assessed 1,212 posts from personal-finance influencers on TikTok, found one in seven posts contained misleading advice. So, how do you know what’s real and what’s false? Here are five pieces of advice TikTokers get wrong.

1. S corporation “Loophole”

One of the most alarming pieces of advice to circulate TikTok is a claim that S corporation accounts allow you to avoid paying taxes. This idea stemmed from a TikTok user who stated that under an S corp., various personal vacations or purchases can be classified as a company expense.

What is an S Corporation? This account allows corporations to pass taxable income, credits, deductions, and losses through to shareholders to avoid paying double taxes.

While there is some truth to this statement, the TikTok user claims that you can categorize any personal purchase as a business expense. In reality, a family trip to Disney World, luxury handbags, sports cars or expensive jewelry doesn’t always qualify.

On the contrary, an S. Corp. only allows eligible expenses (i.e., health insurance, parking/tolls, etc.) that occur during the course of business activities. While this structure may be an option for qualifying business owners, it’s important to consult a tax specialist to ensure you’re on the right track.  

2. Off-Shore Accounts

While finding ways to avoid paying taxes is a hot topic on TikTok, this video collection has more negative impacts than good. Some “FinTok” influencers advise users to set up a business account in other countries where the tax percentage is less or nonexistent.

However, these actions are classified as tax evasion, an illegal activity where a person or entity deliberately avoids taxes. According to the IRS, penalties include jail time of up to five years, a fine up to $250,000 for individuals or $500,000 for corporations, or both. Again, consulting a professional who specializes in business tax reporting will offer solutions that fit your organization’s needs.

3. (#Ad)vertisements or Sponsored Posts

While most TikTok influencers come across as charming and likable, it’s a good rule of thumb to remember they get paid for promoting products and services. If their content is littered with paid partnerships that have a gimmicky feel or offers a quick return, it’s likely the influencer didn’t have the time to validate those products before bolstering them.

In fact, some TikTokers can earn anywhere from $50,000 to $150,000 for a successful brand partnership. With a large payday at stake, it’s feasible that some influencers may bend the truth on products/services they haven’t personally used. To that end, it’s important to do your own due diligence before buying into advice, products and services, claiming to bolster your business.  

4. “Easy” Lending

Some social media influencers will plug quick financing options and business loans as an easy way to fund your next venture or earn passive income. In reality, some influencers can omit certain risks for the sake of attention-grabbing content. For instance, a viral TikTok creator told Rolling Stone her financial success resulted from leveraging lines of credit to invest in assets that make passive income.

Essentially, this TikToker opened credit cards to purchase food and flip it for a profit. As she built credit and increased limits, her side gig grew into business lines of credit used to invest in Airbnb properties. However, this strategy doesn’t take processing fees into account, resulting in discrepancies. It also poses severe financial risks, especially when filing taxes, which is a piece of advice this creator leaves out.

5. Side Gig Hustlers

Some side gigs can be very lucrative and often put you in a better financial space. However, TikTokers and social media influencers can make renting out property, drop shipping, and more, appear more lucrative than they genuinely are. In fact, one TikToker shared a video claiming, “$10,000+ a month is not that hard. You just need a side hustle that pays you $330 per day,” which garnered 1.4 million likes.

These eye-catching videos lure viewers in without sharing the whole picture. Take drop shipping, for example; financial influencers often leave out the costs to start or maintain this business type. According to Business Insider, this side gig can cost business owners a minimum of $1,000 in the first month.

The Bottom Line

Social media has become a more approachable way to get business or financial advice at your fingertips. However, it’s essential to take each claim with a grain of salt and consult a financial planner, tax advisor, or business consultant before making costly and important decisions. Researching is imperative to creating a solid foundation and building equity when starting or growing your business.

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