Avoid These Costly Tax Mistakes for High Earners!
What are the most costly tax mistakes high earners make, especially first-gen high earners? According to Certified Financial Planner and enrolled agent Luis Rosa, the biggest is not being proactive.
The rearview mirror: the tax mistakes high earners repeat
Most people only think about taxes between January and April. They upload a stack of documents, and their preparer looks back at what already happened: here’s your bill, or here’s your refund. Luis compares it to driving while staring in the rearview mirror. By then, it’s too late to change the outcome.
“Taxes should not be a mystery,” Luis says. They can be complicated, but you can plan for them. There are legal moves you can make throughout the year to lower what you owe.
How high earners avoid tax mistakes
- Use your workplace retirement plan. Pre-tax 401(k) contributions lower your taxable income now. Roth contributions can grow tax-free for later.
- Check for an HSA. If you’re on a high-deductible health plan, a health savings account lets you save and invest pre-tax money for medical costs.
- Watch your withholding. Bonuses and stock awards are often under-withheld. The IRS Tax Withholding Estimator can help you avoid a surprise bill.
- Talk to a pro during the year, not just at tax time, once your finances start getting more complex.
For Luis’s full conversation, including his three-bucket plan and tips for business owners, read Tax Traps & Triumphs with Luis Rosa.
This article is for education only and isn’t tax advice. Tax rules change and depend on your situation, so talk with a qualified tax professional before making decisions.
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