Let’s be honest: Tax planning isn’t exactly fun (nor is paying taxes). But ignoring it could mean parting with money you didn’t have to.
Find Out: The Estate Planning Secret the IRS Doesn’t Want You To Know, According To John Liang
Read Next: 10 Cars That Outlast the Average Vehicle
If you’re making one of these seven common tax planning mistakes — and many people are — you could face higher tax bills or missed opportunities come 2026. Christopher Stroup, a CFP and founder of Silicon Beach Financial, explained what to watch out for and how to get ahead of the curve.
Waiting Until You File To Start Tax Planning
Tax planning should be “proactive, not reactive,” Stroup insisted. “When you wait until March, most of the best opportunities are already gone.”
In fact, even sooner than that, as by year-end many strategies are off the table, especially for equity compensation (non-cash pay, such as stock), retirement savings and charitable giving, Stroup said. “Last-minute tax planning tends to be reactive, rushed and sloppy. Real tax savings require time to coordinate across your income, goals and entity structure.”
By waiting until the end of the year, you could be failing to coordinate with your financial goals at best or missing important deadlines and subjecting yourself to higher tax or penalty fees.
Learn More: I Asked ChatGPT To Explain How Rich People Avoid Taxes Like I’m 12 — Here’s What It Said
Failing To Track Cost Basis
Another common mistake is neglecting to track your cost basis, especially for stocks, crypto or equity compensation, Stroup said. Your cost basis is essentially what you originally paid for an investment, including commissions or fees. It’s easy to lose records over time he said, but if you don’t have documentation to prove it, you could be taxed as if the entire sale was profit — even if you only made a modest gain or none at all.
Not Adjusting Your Withholding After a Job Change
If you experienced a job change during the year but fail to account for it in your withholding — the amount of taxes you pay — this could cause problems, Stroup said. “A second job or dual-income household might bump you into a higher bracket. If you don’t update your W-4 or check your withholding early, you might face an unexpected tax bill and possibly a penalty.”
Underestimating Quarterly Tax Payments
If you earn income that must be reported on a 1099, either as a business owner or freelancer/contractor, you’re expected to pay estimated quarterly taxes. “Many freelancers forget to account for self-employment tax, which can add 15.3% to their liability,” Stroup said.
Unfortunately, if you underpay your estimated taxes, the IRS may charge penalties, even if you’re due a refund later, Stroup warned. “Accurate quarterly payments protect cash flow and avoid year-end sticker shock,” he said.
Missing Out on Tax Credits You Might Qualify For
For eligible taxpayers, some credits can reduce your tax bill “dollar for dollar,” Stroup said, but many people assume they don’t qualify without even checking. A few of these credits include:
- Saver’s credit (for low- to moderate-income retirement savers)
- QBI deduction (for self-employed and pass-through business owners)
- Health savings account contributions
- Education credits like the lifetime learning credit
Not Preparing for the 2026 Tax Changes in the BBB Bill
Recently President Donald Trump signed the “One Big Beautiful Bill” (BBB) into law, which maintains many of the tax cuts from the Tax Cuts and Jobs Act of 2017 and adds other tax changes. It’s important to plan for how this will impact next year’s taxes, especially as some of the provisions are retroactive to 2025.
“Start modeling different scenarios now. Look at whether Roth conversions, income acceleration or trust updates make sense under current rules,” Stroup said. The 2026 sunset could bring higher income, estate and capital gains taxes. Early action lets you use today’s lower rates strategically.
Trying To DIY When You Need a Pro
When your financial life gets more complex than a W-2 and a 1099-INT, it’s time to bring in the professionals, Stroup said. If you’re dealing with equity comp, restricted stock units (RSUs), multiple income streams, business ownership and/or changing tax law, these all signal it’s time to partner with someone who can go beyond filing and focus on building after-tax wealth.
More From GOBankingRates
- 7 McDonald's Toys Worth Way More Today
- 4 Companies as Much as Tripling Prices Due To Tariffs
- 5 Cities You Need To Consider If You're Retiring in 2025
- 3 Reasons Retired Boomers Shouldn't Give Their Kids a Living Inheritance (And 2 Reasons They Should)
This article originally appeared on GOBankingRates.com: 7 Common Tax Planning Mistakes To Fix Before 2026, According to a CFP
