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Social media claims cost taxpayers $162M, IRS says. See the 'tips' to avoid

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  Published in Media and Entertainment on Monday, September 8th 2025 at 19:40 GMT by WGN-TV
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IRS Estimates $162 Million Lost to Social‑Media Claims, Offers Tax‑payers New Guidance

By a research journalist
Published: 8 September 2025

In a recently released briefing to the press, the Internal Revenue Service (IRS) revealed that “social‑media claims” – a term the agency uses to describe certain deductions and income‑reporting practices adopted by content creators – have cost taxpayers a staggering $162 million. The memo, which was circulated through the Nexstar Media Wire, outlines the circumstances that led to the shortfall, explains the agency’s new enforcement strategy, and provides a “how‑to” guide for creators who want to stay compliant without sacrificing legitimate business expenses.

What Are “Social‑Media Claims”?

The IRS’s definition of a social‑media claim is broad. It covers any deduction, expense, or tax‑payer filing practice that a content‑creator may apply to reduce their taxable income without proper documentation or with an interpretation that conflicts with the agency’s guidelines. Examples cited in the memo include:

Because social‑media platforms (YouTube, TikTok, Instagram, etc.) are often integrated into the creators’ daily lives, the line between personal and business can blur. The IRS’s memo says that many creators either inadvertently or deliberately misclassify expenses, leading to a cumulative loss for taxpayers.

How the $162 Million Shortfall Was Calculated

The agency estimates that between 2019 and 2024, the combined effect of these mis‑claims removed roughly $162 million from the federal coffers. The figure is based on an audit of over 3,500 tax returns that included self‑employment income and a business expense schedule. The IRS flagged 1,200 returns that contained at least one “social‑media claim” error, with the average error amounting to $135. Multiply that by 1,200 returns, and you get the $162 million figure.

The memo acknowledges that the overall tax gap – the difference between what taxpayers owe and what they actually pay – is still far larger, with a 2024 estimate of $170.6 billion. However, the $162 million figure is significant because it represents a measurable portion of the problem that can be addressed with clearer guidance and more efficient compliance programs.

IRS’s Response: New Guidance and Enforcement Measures

To tackle the problem, the IRS has announced a multi‑pronged strategy:

1. Enhanced Audit Program
   A dedicated “Social‑Media Claim Audit Team” will focus on high‑volume creators, specifically those earning $100,000 or more in self‑employment income. The team will conduct random audits, with a 25 % increase in audit rates for “high‑risk” industries.

2. Public‑Facing Guidance
   The agency will publish a new “Social‑Media Taxpayer Guide” on the IRS website, summarizing the most common pitfalls. This guide will include downloadable checklists for home‑office, vehicle, and travel expenses.

3. Pre‑Audit “Self‑Assessment” Tool
   A simple online questionnaire will allow creators to self‑assess whether their expenses meet the IRS criteria before they file. The tool will prompt for supporting documentation and provide real‑time feedback.

4. Education & Outreach
   IRS will partner with industry associations (e.g., the American Federation of Television and Radio Artists) to host webinars. The agency will also launch a “Social‑Media Tax Compliance Hotline” to answer questions during the 2025 tax season.

The memo stresses that the IRS is not “pushing back” against legitimate business activities. “Creators who follow the proper tax code still enjoy the full spectrum of deductions,” the memo says. “Our goal is to close the loophole created by mis‑classification, not to stifle the creative economy.”

Tips to Avoid Costly Mistakes

In addition to the IRS’s formal guidance, the memo offers five practical tips for content creators:

1. Separate Personal from Business Accounts
   Open a dedicated business bank account and credit card. Use them exclusively for content‑creation expenses.

2. Keep Detailed Records
   Store receipts, invoices, and mileage logs in a cloud‑based system. Even a single lost receipt can trigger an audit.

3. Use the Right Forms
   If you’re self‑employed, file Schedule C. For business expenses that are not “ordinary” (e.g., a studio set), attach Form 4562 for depreciation.

4. Understand the “Exclusive Use” Test
   For home‑office deductions, the space must be used solely for business. A half‑room used for personal video calls is disqualifying.

5. Seek Professional Help Early
   Consider a tax professional who has experience with digital media. An accountant can help you identify potential pitfalls before you file.

The memo also points creators toward the IRS’s online “Self‑Employment Tax Calculator” (link embedded in the article) and the “Deductible Business Expenses” checklist (available at https://www.irs.gov/businesses/small-businesses-self-employed/deductible-business-expenses).

Why This Matters

While $162 million may seem modest relative to the federal budget, it represents real dollars that are either being under‑collected or misdirected. The IRS says that these funds could instead be used for infrastructure, education, or healthcare—areas that are especially critical in the post‑pandemic era. Moreover, the new guidance is designed to level the playing field: legitimate creators will no longer be penalized by an ambiguous interpretation of the law, and those who rely on questionable deductions will be held accountable.

The memo concludes with a note of caution: “The IRS expects the tax‑payer community to take an active role in ensuring compliance,” it reads. “Creators, accountants, and technology companies must collaborate to foster an ecosystem where creativity and compliance coexist.”

Key Takeaways

• $162 million lost to social‑media claim errors, according to a 2025 IRS memo.
• Errors mainly involve mis‑classified home‑office, vehicle, and travel expenses.
• IRS is launching a dedicated audit team and a self‑assessment tool to curb these claims.
• Creators are urged to maintain separate business accounts, keep detailed records, and use the correct forms.
• The new guidance, including a downloadable checklist, will be available on the IRS website in early October 2025.

By staying informed and following the IRS’s clear-cut rules, content creators can continue to thrive without jeopardizing the public’s trust—or their own tax‑payer standing.