5 Tax Mistakes You Can't Fix After December 31st

Every April, somebody asks their CPA, "Is there anything I can do to lower my tax bill?" And the answer is almost always, "Not anymore." So today, Phil's walking through the five moves that have to happen before December 31st, including two new rules this year that are quietly costing people who give to charity and people who max out their 401k.

Phil, we're talking about an April surprise. So, I want you to tell me what the most expensive surprise a client has experienced in April that could have been fixed in November.

Speaking about taxes, of course, when you bring up April and it's hard to believe that we're talking about that because it's October of 2026, but the tax man cometh and April gets here pretty quickly.

You're right.

Absolutely, Spell. There's a lot of things that cause people to miss opportunities, whatever they are, there's lots of them, but I would say a few that just come to mind quickly would be missing opportunities to harvest losses. A lot of people don't know how to do that. They love to invest and they have brokerage accounts, but they don't take advantage of losses in their account. And I'm not talking about long-term losses any more than I'm talking about the short-term losses. Both of them can happen. And so capital gains and capital losses, whether short-term, long-term, can cost you a lot on your tax bill.

So learning how to use losses, harvesting those losses, that can be a great way to avoid unnecessary tax. So that would be one. I think a lot of people just miss that, or they don't have an advisory team that's doing it for them.

The second one that comes to mind would be, I'm speaking to our self-employed people here, or people that might have side gigs. They're making plenty of money. They've got these side businesses and they're not paying enough. In other words, they're not paying their estimated estimates. And so you end up with these late payments and interest charges. And those can be pretty sizable, depending on the person, depending on the amount of money that we're talking about. Those can be pretty sizable. We just looked at one last week, didn't we? That one was about $10,000 if I'm not, or about $7,000. Something like that.

It was north of seven.

And unfortunately, once you're there, you can't change it. So that was simple, easy to fix, and should have never happened.

The other one is getting to April 15th and realizing the things that must be done by 12/31, whether it's maximizing contributions to a K plan or retirement plans, and there's a number of those things. You can't back up and fix that.

It's true.

And those things can make a pretty significant difference. I'd say there's one other one and that is if you are close to being married and then you called it off, and filing jointly makes a huge difference. Massive. Not trying to force anyone to get married, but huge difference when it comes to how you file on your taxes.

No doubt. No doubt. We had an experience this year with some folks that we work with and we did an analysis because they weren't married. They are married now, which we're thrilled and everybody's so over the moon about it. It's wonderful.

Yes.

But how much would it have cost these folks had they not tied the knot officially? It's $20,000 a year. And that was looking at it through a very simplistic lens, right? And they're fairly complicated. So, I think that number could get larger very easily, very quickly. But, yeah, just being married, filing jointly was enough to save them pretty significant dollars.

And they wanted to be married anyway. They've been talking about this forever and they said, we just haven't done it. And now they're ecstatic. It's fun to watch them. I think they're going to be on a forever honeymoon. They're just having a great time.

I think you're right. I think you're right. Okay, Phil, let's talk about the five mistakes that people commonly make that they get into the month of April and they go to their CPA and they say, "What can I do to lower my tax bill?" And they hear these words, "Well, it's too late."

All the time.

But there are five primary mistakes that we're going to go through today. The first has something to do with charitable gifting. And so if someone is giving the same amount every year and they're giving it out of their checking account, it's the most expensive way to give to a charity, is it not?

Well, it certainly could be. A couple things that come to mind when you say that. One is a lot of people just write a check to a charity. Well, if they're not itemizing, they're not going to use that. That's not going to help them on their tax return unless it gets above that standard deduction, which for married filing jointly in 2026 is $32,200.

That's a big amount.

It's a big number. So, unless they get past that, they're not itemizing, right? So, that means if they wrote a check for 10 grand to their favorite charity, it's not helping them at all. They think it is. They feel good about it and they say, "Oh, this will help me on my taxes." No, it won't. No, it won't. If you get the standard deduction, then you're not using that $10,000 gift that you made. It's not helping you at all.

Now, if they took that gift and they said, "I'm going to do this every year anyway," and they said, "Let me just do three or four years now. I've got the cash flow to do it. Maybe they had a good income year. They could do it." All of a sudden now they're well into the category of itemizing. They're well beyond $32,200 and then lots of other things probably come into play.

You can all of a sudden start driving that amount up that's going to be an above the line deduction.

Those itemized deductions are huge. But those things really move the needle. But if they're not bunching, and some people you say this to them, they look at you like you just landed and they say, "What's bunching?"

Right. Well, bunching is not new.

No, it's been around for a while. It's been around for a long time. But just think about before you get to April 15th every year, if you're going to make these gifts anyway, why not go ahead and do it? And then be sure you understand other things that can help you get across the itemization threshold, right? That get you past that. There may be years where you just won't get over that threshold, but you really need to think about that. So bunching is big and people miss it all the time. If you're going to make these gifts anyway, roll them into one year. Use a DAF even, people do that. But use bunching to your advantage. Huge opportunity.

You said it was particularly important for a single filer, because that reduces your standard deduction to 16,100, 16, $16,100. So if you give 10 or 15 a year to the charity or multiple charities even, what you're saying is you could put several years worth of gifts, assuming that you've got the cash on hand to do it or you've had a great year with your employer. That makes sense. So you can get over 161.

Think about a single filer with mortgage interest. Maybe they have mortgage interest of $10,000 a year and some bunching all of a sudden, and maybe they're giving 5,000 a year in their charitable planning. Well, that's $15,000, below the standard deduction of 161 for that single filer. Just a little more and they can start to use all of that. So, if they're going to make that gift every year anyway, why not just take advantage of it? Especially if you're having a really good year or had a good year, you want to pull that tax rate down. If you're going to make those gifts anyway, look at the other things that could drive you above that 161, or as a couple 322. Think about all those things. That's just good tax planning. And a lot of times people just leave that on the table.

Should a CPA be bringing these types of strategies to the table?

You would think so. I talked to a CPA today, and today, by the way, as we're filming is the 15th of October, so this is extension deadline day.

You're right.

And so I was talking to a CPA today and he said that he was beyond busy. Gave me a few minutes, because we were talking about a mutual client, well-to-do client, and we needed to cover a couple of things. We spotted something on the return that fortunately is going to be fine. But they're not always looking at these things, the planning things. They are trying to put what you give them on the return and get it to a point where it's ready to go to the IRS.

Do I think they should do planning? Yes. And I think some do and they do it well. I think others don't and they don't attempt to do it. They are purely doing your return, preparing your return, as they're called, a tax preparer. That's it. I think that planning is a missed opportunity for so many of the people in that profession. And probably if we're honest about it, a lot of people end up paying a lot more tax as a result of not having someone who's really planning.

Yeah, that's true. It's true. All right, Phil, let's move on to the second mistake that people tend to make. They get beyond the December 31st deadline and then just scratch their head and think, "What in the world was I thinking?" Or, "Why wasn't I thinking?"

Or you weren't thinking. Right. You were busy with other things.

That's right. That's right. So, this one has something to do with 401k contributions or deferrals and the catch-ups that are associated with 401ks.

A lot changed in the last few years. When SECURE Act came out, SECURE Act 2.0, we saw a lot of changes. One Big Beautiful Bill threw a lot of changes. So I would say that inside the tax world, it's had more volatility in the last few years than we've seen in a long time. And a lot of it in a good way.

So, I think what you're referring to at this point is number one, before 1231, before December 31st, make sure that you're maximizing those contributions to your 401k. Because that is a bite on April 15th that you can undo. Got to be in there by 12:31. Whether you're a W2 earner or self-employed, you got to have it in by 12:31. You don't have a delay. The only caveat to that or exception to that is profit sharing, right? That can come after. The other caveat or exception would be a cash balance plan. So those things can be delayed. SEP plans, things like that, we can delay a little bit. IRA, by the way, you can do till April 15, but the majority, you got to do it by 12:31. And if you don't, you've missed the opportunity.

One of the things that started in 2026 that people are missing, I'm hearing and seeing this a lot. If you make over $150,000 a year, your catch-up contribution, everyone gets a catch-up contribution if they're over 50 years old.

Bingo.

Then you get to put an additional amount into your 401k. That amount this year, I believe, correct me on this if I'm wrong, Spell, but I think 80, $8,500. So $8,500 this year has to go in Roth if you make over $150,000.

You're right.

So if you're over 50 and you make 150 or more, you got to put that amount in Roth. A lot of people are missing that. Now there's an additional piece to that. Some plans don't offer Roth, believe it or not.

You're right.

If your plan doesn't offer Roth, you're off the hook, but you also don't get to make the catch-up contribution. So, not a good deal. If your employer doesn't allow that, you need to talk to them. Get with your HR folks and see if you can get that changed. But you want to make sure that 1231 doesn't pass you by and you failed to fund.

In fact, I just met with a client, Spell, before coming in to film, and they're the owner of the company. They didn't realize that their 401k contributions were suspended by their own volition. They didn't realize this happened, and so fortunately we caught it midyear or slightly beyond midyear. We've got time to get them fully funded.

Yeah, that's good.

But had we not caught that, they would just miss the opportunity.

That would have been a really expensive April.

It would cost them a little extra money.

Yeah, that's right. Phil, the catch-up contribution for 401k this year is 8,000. 8,000. 8,000 even. You're probably thinking 8600 on IRA catch-ups.

Yes.

So you have 7500 on that plus an $1,100 catch-up. So $8,600.

So, Spell, there's the CPA ought to be bringing these things to you, right?

But chances are you're not meeting with the CPA until after the turn of the year. So they're not going to help you plan that. More than likely, they're not going to be there for you when it comes to that part of the conversation. So, what they're going to offer is, well, you could always fund your IRA, and that'll give you a tax deduction. Problem is, for a lot of the earners today, they're making beyond what they're allowed to take or to contribute to an IRA and actually get the deduction for it, right? They can still contribute to the IRA, but they can't deduct. There's no deductibility.

One more thing on before year end. If you're 60 to 63 years old,

Oh, yeah. You got the super catch-up.

So, catch-up was good. Super catch-up during that short or small window, 60 to 63 years old. It's 150% of the catch-up provision or catch-up contribution amount, which would be 11,250.

Yes. Nice. Nice benefit.

Definitely got to get it before 12/31.

A lot of people are missing that, but you got to get that one. That's a huge benefit and can help you get closer and closer to being prepared for retirement.

So, I agree, Phil. The third mistake, and you already mentioned this or you hinted at it earlier, but harvesting losses, while not super complex in terms of actually doing it, so many people don't do it. Why don't people harvest their losses? And why is that on our list of five mistakes that people make?

Well, exactly what you said. People just don't do it. So, I think it needs to be on the list because when you look at a tax return, capital gains are not the greatest concern for most people. They think, well, that's a 15 to 20% tax. I'm not really worried about that. But it stacks.

It does.

And as that stacks, it hurts your overall tax. You also have an additional 3.8% on investment income, right? And so if you're over certain levels, that investment income tax, an additional almost 4%, you're going to get hit with that.

Why?

Right. You should try to avoid that. But if you have losses in a portfolio, why not take those, because worst case you can use $3,000 of it to offset your ordinary income.

True.

And then you carry forward the rest of it.

So we can carry those forward and that's great. What do you mean by carry it forward, to a listener who may not understand?

Well, let's say that we capture or harvest $10,000 of losses, and you don't have any gains, capital gains, to offset with that harvested loss. We can still use $3,000 of that harvested loss against our ordinary income.

So if I make 100,000, you're saying that on the tax return I could show that I make 97?

97 in effect, right? In effect. So yes, and then even though we didn't use all 10,000 of what we harvested, we take the other 7,000 and roll it forward so we can use it next year.

Nice. Okay. So great. It's a great opportunity.

Yeah, for sure. But most people, they don't harvest, one, because they don't understand it. Two, they're fearful of it. They're not quite sure how to do it, and then they think they'll make a mistake, so they just don't do it, or they work with advisers that don't do it, and a lot of advisers don't for compliance reasons or what have you. So I would say that loss harvesting, short-term, long-term, look for that, because chances are you're going to have some short-term or long-term gains in the portfolio. Taking advantage of that could be huge. And it can help wash or remove some unnecessary tax. Right. It's not the end all be all, but it's an easy way to capture something that can help you.

Now, you got to be careful when you're harvesting a loss. One of the mistakes that I see people make, particularly those that are new to this, they will sell the position and before 30 days elapses, they buy it again, and once you repurchase, unfortunately you've lost what you were trying to harvest, right? So, you just neutralize the whole thing. So, it's called a wash sale rule. And if you violate that, then sorry, you just missed what you were trying to accomplish. So, be sure that you understand, if you sell a position to take the loss, you got to wait 30 days. So, don't buy it earlier than those 30 days or you're going to give up the loss. And some people, they don't know that. So, wash sale rule, you just careful.

You just took my trick question. I was going to try and get you with that.

Sorry.

That's all right.

Sorry.

It's all right. It's hard to trick you. Okay. Let's move on to the fourth mistake that people make prior to December 31st. And keep in mind that these are mistakes that people carry into the following year. They think, "Oh, I've got until April to get this done." When in reality, you're wrong. You have until December 31st. And if you hit January 1, sorry, Charlie, too late.

The fourth, and this is something that you should do well in advance to December 31st, but it's check your withholdings. And you mentioned this a little bit earlier as well, particularly for those who maybe have a side hustle, they've got a little 1099 income or they've got different things going on in addition to maybe a traditional W2 paycheck. But checking your withholding or your withholdings is very, very important, isn't it?

I think if you're not aware of that, and you talk about this a lot, Spell, you're getting a big refund, your withholdings are wrong.

Wrong.

Right. Why should you be getting a refund? It's not new money.

No, it's not Uncle Sam giving you something.

Nope. It's your money. You're getting your money back without interest. And that doesn't really make a lot of sense to me. That's money that could have been invested. That's money that could have been used to pay down a high-interest debt. You could use that money for a lot of things much sooner versus waiting on the IRS to return it to you. It was your money. So, yes, I think withholdings are very important. A lot of people don't understand what that looks like, especially in the W2 world. They're filing that election and they don't really understand what it means, right? And so they'll put zero or one or two or three on their little form and they don't know.

Yeah. And then they end up getting this big refund, and it feels good. I can't tell you, Spell, how many people I've talked to through my career that almost get excited or giddy when they are waiting on that refund check. The CPA says, "Hey, by the way, you're going to be getting a refund." And you would think that they just scratched a lotto ticket that said you're a winner, and they're just getting their money back.

That's not being a... you're a loser when that happens, because you lost the opportunity on that money, right? Not a loser. You're not a loser as a person, but you lost.

You lost, right?

You lost, right? Because you missed opportunity. So, you definitely want to check your withholdings. Don't seek a refund.

Yeah. No. No. Seek to break even or maybe owe a little bit.

Just a little. It's okay to owe a little bit.

It's okay as long as you can. As long as you have the discipline to be ready to pay it, right? I'd much rather you pay a little at the end

Yeah. For sure.

than to get a refund.

I agree. I agree. And one of the points you made earlier in this episode, Phil, was talking about getting a refund, which means you overpaid. But the other side of that coin is you overwhelmingly underpaid. And if you underpay and then you don't make yourself true or true up your underpayment, you can face taxes and interest on those underpayments, which is penalties can be pretty severe. So, that is another point I think worth mentioning. Another mistake, 'cause again, this is a December 31st deadline. And if you don't hit it, then there is no do-over. As kids, you could always get a do-over, right? When you're in the adult world, especially with the IRS, rarely do you get a do-over.

Yeah. So, got to be ready. And it takes planning.

Yes, it does.

It's not that hard, but it takes planning.

Okay. We're going to move into the fifth mistake that people make. And this one, some people may know about it. I think this one will probably be less known. And it sits on your dinner table. Okay. So, you've got... not actually, but we're talking about salt. And so, this is state and local tax. That's the acronym SALT. Talk to me a little bit about SALT. And this is also legislative change, not necessarily for 2026, but it is a legislative change. So, talk to us about this mistake and what people aren't taking advantage of.

Couple things to be aware of with SALT. I think people do miss this. I don't think CPAs talk about it enough, but for a long time, our SALT limit was $10,000. And so if you were itemizing, you could go up to $10,000 on your state and local taxes. Write that off. And we'll save you some tax. Well, One Big Beautiful Bill changed that, and it is now $40,400.

Big jump.

Huge. Huge jump. Now, there's a phase out, if you make over a half million a year. And so I say that because we could certainly have listeners making that. I hope we do. But there's lots more people that don't.

Sure.

And so speaking to both of you, one, if you make over 500, congratulations. You're going to have a phase out on this. But if you make under 500, let's figure out, is there a way for you to maximize this? Do you have property? Do you have these state and local taxes where you can use that? And get the most out of this change in the bill.

Yeah. A lot of people are not able to use it, but boy, there's plenty out there that can. Just have to know the limits on it, how it works.

The other thing that a lot of people don't know about is state and local tax or SALT. You're right, sits on the table. State and local tax is not just your state tax. Some people that don't have, let's say you don't have a lot of state tax. Maybe you get lucky somehow and you don't have a lot of that. You can actually collect all of your receipts of purchases. So sales tax is in there, and you can do one or the other. Not just your state tax. So you do one or the other. Now that's a lot more cumbersome because you got to save all the receipts and you got to figure it out.

That's right.

But you could do that.

Yeah. You could do that.

So those little things, those nuances are useful because they can really change the outcome of your tax return, particularly when you're making significant dollars and when you have significant amounts of tax to pay.

Yeah, for sure. Phil, let's combine two of these mistakes and see how it may roll into a tax return. Remember our first mistake, potential mistake that someone may make in not bunching. Combine the $40,400 increase or SALT cap with someone who bunches. How could that benefit them prior to December 31st?

Well, if you're not itemizing, right, you're missing a lot of that. So, let's say that you had one deduction of $10,000 and maybe you had state tax of $25,000. If you had a gift of 5,000, you're going to fall short. But if you have some bunching opportunities and you're going to give that money anyway, take advantage of all of that. Look at all of that through the lens of what does it look like combined and how many years do I have to bring into this year in terms of bunching to really maximize this thing. And I think you reserve that for the years when you feel like you're making the most.

Right, right. So when you're having those big years, maybe some bonuses are coming in and you're expecting a bigger income, you need to be planning this in the fourth quarter, not in February or March.

Exactly right. You need to be planning that now. This is the time to be sitting with the people that you work with, whether it's a CPA, whether it's your wealth advisory team, or maybe it's one in the same, but now is the time, the next 90 days or less now, say the next 75 days or 70 days, I guess. Gosh, we're already at the 15th of October. So, we don't have long. But now is the time to be planning these things to see what your projected tax looks like. Projected tax is very important. You get to decide, have I paid enough? Are my estimates okay? Have I paid enough? Am I going to hit the safe harbor exemption and not underpay? So, am I good on that? What am I missing that can drop my tax bill? What did I get my HSA funded? Did I get my 401k funded? Is all of that done? And then what about my charitable contributions? Have I made enough? Do I need to make a little more? What about my state and local taxes?

What about all of those things are going to push me into a place that's meaningful on my tax return? It's not going to really save me a lot when I compare the two, then I'm not going to sweat it, right? But a lot of times when people will take the time to work with someone who truly is a tax planner, you'd be amazed at what can be saved.

Oh, it's unbelievable. And it just takes a little bit of effort. This is not something that's insurmountable or something that it is going to be it's not going to cause you to break out in a sweat. [laughter] But I tell you this much, you'll be a lot cooler come April 15th. That's when I see people break out into a sweat.

No kidding.

When they get the call that says, "Well, you owe this much and hey, if you had done this, you'd owe a lot less."

That's well said. I hate when people get told, "Well, if you had done this," don't tell me about hindsight. It's easy now at April 15th to tell me. I need to know before. Isn't that the CPA's job though?

I think that you're maybe referencing what we hear a lot from CPAs. "Well, we missed the deadline on that."

Well, I'm paying you if I'm the client. I'm paying you to prepare my return. I understand that. But why doesn't the CPA position or other professionals on people's teams, why aren't they telling people this in a fourth quarter review or even a third quarter review?

Most of the time, Bill, CPAs don't work in that world. They don't do quarterly reviews the same way say that a wealth advisory team would do it. They don't see it that way. After April 5 or October 15th they're taking time off, or after April 15th they're taking time off. That's the way they think, and that's not a bad thing, but they put in a lot of work January to April and a lot of work from say August, September, October. That's their busy times of the year and then they're ready to take a breather. So they're not always meeting with people right now. They'll tell people, "Well, make sure you don't do this next year." People forget that.

Yeah, right. I think you're right. You need to sit down with those people more routinely.

That's really not what a CPA does. CPA is going to tell you, "Make sure you bring me all your stuff, and then I'm going to help you sort through it and tell you if I see mistakes." But what they're doing most of the time, not every CPA, but most of the time, accountants are taking what's already done and putting it on the tax return the way it's supposed to be so that it can be signed and delivered to the IRS. That you can't fix what's behind you.

Right. So I think proactive planning is so important. I'm glad to say that we do it, but I think the consumer, unfortunately, it's really on them to find the right people that will help them plan earlier.

Yeah, it's really on them. Hate to say it. I can't just blame it on the CPA. That's how the CPA works. Can't really blame it on anyone. It's really up to the consumer. If they want to save on their taxes, then ask the question, "When should we meet? What should we be doing leading up to the end of a year?" There are deadlines. Some things we can push into the next year and still get to take advantage of that, but most of the time you can't.

So, Phil, let's just have the conversation quickly. We started this show with three hypotheticals and actually they're not hypotheticals, they were reality. But had we not talked with these clients earlier this year and really encouraged them to make a few changes, how much additional money would have been out of their pocket come April of 2027?

$40, $50,000.

And that's across how many clients?

That's three that I'm thinking about, maybe four. Spell, the numbers are bigger than that, but the ones that I can immediately think about that we've seen in the last month or two or three easily.

And that number is huge when you take it across the country. Gosh, I can't imagine what people are paying that they don't need to pay because they have poor planning or no planning, right? Not so much that they have a bad CPA, they're just not doing planning.

Phil, which two elements collided in this story?

Well, of course, tax strategies.

Yep. Huge. You got that one. This is my opportunity to trick you. And you invented the elements. So, if I can get you on this, that's pretty good.

All right. All right.

You might... So, you got one out of two. That's 50% so far.

I think philanthropy would be the other one.

You got it. Nice job.

Yeah. Thank you. I was sweating there for a minute. I thought, "Wait a minute. Is it... 'cause it could go another way."

No, those are the two that I was thinking about. So, philanthropy and tax strategies.

Yep. Two very important elements.

Yeah, for sure. Especially when it comes to tax planning. [music] We got a pretty nice new website that has tax strategies and philanthropy connected. I think that we'd be remiss if we did not mention a reason. There's a reason why.

Yeah, there's a reason why. For sure.