Two ways to reduce the odds of a tax audit in 2022

Two ways to reduce the odds of a tax audit in 2022

Filing taxes is never fun, but last year was arguably one of the more difficult in recent history. Between federal programs to help provide aid during the pandemic and business owners likely needing to take losses in creative ways, many have voiced concern that the risk of an audit could be high in 2022.

It can help to take some steps to decrease the risk of an audit in 2022. Two examples include:

1. File taxes and report income

One of the most common mistakes that will increase the risk of an audit is a failure to file taxes. Employers and financial institutions send information to the IRS. As a result, they likely already have a good idea about what taxpayers should report. The IRS has also gotten better at reviewing filings, using special software and other technology to sort through filings and flag those that require closer review.

2. Report crypto

More and more people are using cryptocurrency, and the IRS is well aware of this growing trend. Anyone that looked over tax forms last year likely noticed one of the very first questions asks about crypto. The IRS expects taxpayers to report crypto transactions. The IRS is aware of this rise and is looking for a similar rise in reporting.

Depending on your situation, the IRS may expect you to file Form 8949 to report these transactions.

Bonus tip

It is also a good idea to keep records in order. This can help increase the efficiency of a response in the event of an audit. Examples the IRS will likely watch in 2022 are the use of the home office deduction and charitable donations. The IRS is likely to review large charitable donations, especially if they seem out of proportion with reported income. It is also likely to receive a surge in attempts to get a home office deduction as more and more taxpayers worked from home due to the pandemic. However, it is important to note that the Tax Cuts and Jobs Act suspended this write-off through 2025 and it is currently generally only available for the self-employed.

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