“A guy on Tik Tok says that if I have investment real estate then I shouldn’t be paying any taxes”. A high income client actually said this to me in a call yesterday. I’ve commented many times before that I never anticipated that dispelling social media misinformation would become a major portion of my job. Yet it has. Whether we are discussing real estate, crypto, investments, pandemic relief, or other topics, much of the predisposed beliefs held by clients are fundamentally flawed.
The spread of misinformation online is not difficult to understand. It is more difficult for me to understand the slow response of IRS to the surge in high income taxpayers who are in violation of tax laws because they heard something online. The number of high income people who invested in short term rental real estate, for example, who underreported their income tax liability is just astounding. By “slow response”, I don’t necessarily mean audits and assessments. There hasn’t even been much IRS press release attention to what I see as a sharp rise in noncompliance. Perhaps the IRS has been too overwhelmed with other tax scams.
Things may be changing. CPAs who handle tax problem resolution are beginning to report an uptick in these additional tax assessments. While I am seeing an increase in tax problem cases overall, I do not yet see it stemming from this specific type of misinformation-based tax abuse.
Separately, yesterday I did some reading with the intention of gaining insight into the susceptibility of certain people to online misinformation. Information is limited but fascinating. More on that later.