Free Online Tax Advice Can Cost You Dearly
We love using the internet to find answers, but the IRS doesn’t recognize Google as an authority
I’m going to make a statement that I realize is deeply ironic: be very careful with online tax advice.
Yes, I know, I give online tax advice from time to time. Does that mean you shouldn’t trust me.
Maybe.
There’s two main reasons to be weary of online tax advice:
(1) With taxes, it always depends
(2) Taxes are complicated and so easy to get wrong
It Always Depends
One of the first things that my tax accounting students learn is the correct answer to almost every question is “It depends.”
(I do make them put a bit more than that on their tests)
“It depends” is a great answer for the CPA hoping to rack up more billable hours from a profitable client. It also happens to be true. When we talk tax online, we’re focuses on generalities, trying to help the most people without tripping over ourselves with all the possible exceptions.
But there are exceptions in almost every case. Your situation might happen to be that case.
Let’s look at an easy example. Moving expenses used to be deductible. Thanks to the TCJA changes, they no longer can be.
Except, of course, it depends. Those in the military can still deduct moving expenses.
All those in the Armed Forces being relocated from Colorado Springs to San Diego are likely relieved to hear that bit of good news (especially if they get out of that city south of me before winter).
Except, once again, it depends. If the Airman First Class getting his marching orders doesn’t have the right financial makeup, that moving deduction might not apply.
Enough Google sleuthing might get you the right answer in this case. But the fact is that no good tax accountant will say that a deduction absolutely applies to you unless we have a signed engagement letter and money coming our way.
Those online guides are guideposts.
Taxes Are Complicated
The bigger issue with online tax advice is that taxes are complicated. People get tax rules wrong all the time.
Yes…sometimes even me.
I’m not going to point fingers, but I was inspired to write this post after reading an article from a major, reputable news site that reported on a tax change about as accurately as your crazy Uncle Cleo on Facebook who still argues that the 16th Amendment is unconstitutional.
The tax advice was worse than useless. I’m not exaggerating to say that following this person’s advice would get you in big trouble with the IRS.
Here’s an example I don’t mind pointing to since it won’t lead to an IRS audit. Business Insider, hardly a small publication, reported that Democrats are potentially leaving a tax loophole open that billionaires love.
Except…no. No they aren’t. While I was reading through the article, I kept wondering, “Am I missing something here? Do I not understand the tax code?”
Nope, it wasn’t me. The authors are referring to a fight to lower an estate tax provision that allows you to exclude your first $11.7 million from tax when you die. This is historically high, and debatably should be lowered.
But Jeff Bezos and Elon Musk don’t care about such a pittance (to them). If your estate is work nearly $200 BILLION, the difference between a $11.7 million exemption and a $1 million exemption is like me worrying that my kid stole a penny from my car dashboard.
Plus, well…they’ll have to be dead to take advantage of the exemption. So no, headline writer, billionaires don’t love it.
Taxes are complicated, and a typical news service doesn’t have a good CPA on staff to fact check their tax work (I’m guessing it’s because of our billable rates).
How To Get Good Online Tax Advice
Most people are obviously going to be best served by hiring a tax CPA or EA to look at your whole situation.
CPAs are expensive, though. I know, I’ve sent out plenty of those bills.
If you’re just looking for a bit of guidance, make sure to check the writer’s bona fides. If a writer has one or two articles about tax and a million other articles about finance, budgeting, or investing, be weary. Try to find one that actually writes about taxes on a regular basis.
When I’m going for online tax advice not from my paid sources, I’ll go to The Tax Advisor, which is a journal put out by the AICPA (plus I’ve written for it, so it must be good!). I’m also a big fan of fellow Coloradan Tony Nitti. Both write for tax practitioners, though, and can be a bit dense readings for those not in the biz.
If you’re looking for someone who writes for everyone else, check out Kelly Phillips Erb.
I’m sure there are others that have great writing, and I’d love to hear recommendations. Just make sure to check that they know what they’re talking about before trying to push it through on your own 1040.
Are you in the US working freelance, starting up a side hustle, or working your own independent entrepreneurial venture? Then great news! I have a free, 6 day course covering all the business basics you need to know, from organization to tax! Sign up for it here.
