Many taxpayers learn hard lessons during filing season, but most of the pain can be avoided with a bit of planning before next year. As a financial advisor in Phoenix, I see a lot of the same mistakes repeated across many households, regardless of income level.
The first common mistake is waiting until late March or April to start thinking about your taxes. By the time you are gathering documents, most of the meaningful planning opportunities are gone. Instead, schedule a mid-year and year-end tax checkup. Review income, withholdings, retirement contributions, and any big life changes (home purchase, job change, business income) before December 31st so you can still make changes.
The second mistake is inconsistent or incorrect withholding. Many people get a surprise bill or a much smaller refund than expected because they never updated their W-4 after raises, bonuses, or side-income. To avoid this for next year, adjust your W-4 early in the year. If you have variable income or side jobs, consider setting aside a fixed percentage of each payment into a separate “tax” savings account and making quarterly payments.
Third, I see a lot of people miss retirement and HSA opportunities. People intend to “save more later” and then another year slips by. That leads to higher taxable income and less long-term wealth building. To remedy this, decide on a target contribution level now and automate it. Even small increases in 401(k), IRA, or HSA contributions-set up in March instead of December-can meaningfully lower next year’s tax bill.
The fourth mistake is poor record keeping for deductions and credits, especially for business owners and people with substantial charitable contributions. Without organized receipts and logs, deductions get left on the table. Create a simple system, such as, a dedicated credit card or bank account for only business expenses, a shared digital folder for charitable recipients, and a quick monthly review to categorize transactions while they are fresh.
Finally, many taxpayers ignore how investments are taxed. They are surprised by capital gain distributions from mutual funds or by selling appreciated investments at the wrong time. Going forward, review your taxable accounts for unrealized gains and losses before year-end, be thoughtful when you sell, and if appropriate, consider tax-efficient strategies. Proactive attention to these 5 areas can reduce stress while filing taxes and keep more of your money working for you. If you have any questions or need some tax advice, reach out to Bruce Eisenhauer, Financial Advisory, at Meikle Financial Group.
