I’m a Financial Planner: What To Do After You File Taxes To Owe Less Next Year
Written by
Laura Beck
Edited by
Molly Sullivan
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Owing money at tax time hurts. Financial planners said the key to avoiding it next year is taking action now while you’re motivated to fix the problem.
Figure Out Why You Owed
The first step is reviewing your return to understand what happened, said Roy Tirakayos, a private wealth advisor with Luminate Wealth Management. “Taxes reflect a full year of income, withholding, deductions and credits — not only what happens in April,” he explained.
If you owed more than expected, your paycheck withholding probably didn’t match your actual situation. Starting a new job, earning bonuses or commissions, side income, multiple jobs in a household or changes to a spouse’s income all throw off the numbers. Default withholding settings don’t account for these changes.
Fix Your W-4 Immediately
W-2 employees with large balances usually have withholding set too low, said Peggy James, a CPA with Annuity.org. “The first step is to review your Form W-4 to make sure it’s correct, and if not, submit an updated form,” she said.
James sees this happen most with married couples who both work but didn’t check box 2c on the W-4. “Failing to check the box pretty much guarantees your withholding will be too low,” she explained. Don’t forget state withholding forms either if you owed your state.
The IRS offers a tax withholding estimator tool online that shows if you’re on track for the current year. James recommended checking it halfway through the year so you have time to adjust before the last few months.
If you earn self-employment income while working a W-2 job, James suggested having extra withheld from your paycheck to cover the 15.3% self-employment tax. “This allows you to avoid the hassle of remembering to pay quarterly estimated taxes,” she said.
Max Out Tax-Advantaged Accounts
Tirakayos told clients to take full advantage of retirement accounts. Contributions to traditional 401(k) plans, 403(b) plans and traditional IRAs reduce taxable income dollar for dollar.
Health savings accounts are especially powerful if you’re eligible. “HSA contributions are tax-deductible, grow tax-free and can be withdrawn tax-free for qualified medical expenses,” Tirakayos said. Even small increases to contribution rates make a difference while strengthening long-term security.
Plan Deductions Throughout the Year
Tirakayos explained that deductions result from planning all year, not last-minute decisions. Reviewing whether you benefit more from the standard deduction or itemizing guides smarter choices.
Common itemized deductions include mortgage interest and charitable giving. Bunching deductions by consolidating charitable contributions into one year can help exceed the standard deduction and reduce taxes more efficiently.
Consider Real Estate Strategies
High-income W-2 and 1099 employees often think they can’t reduce taxes since most benefits go to business owners, according to Lance Morgan, founder of College Funding Secrets. His favorite strategy is real estate.
“If you purchase a vacation rental and rent it out for an average of seven days or less, the government allows you to take advantage of bonus depreciation and significantly reduce your W-2 and 1099 income,” Morgan explained. This requires following specific rules and consulting a tax professional, but it works.
Get Professional Help
Tirakayos said tax laws change often and working with a professional can uncover opportunities that software misses. “While professional advice may cost more upfront, it often pays for itself through improved tax efficiency and better long-term planning,” he said.
Owing taxes isn’t a failure. It’s feedback. Making adjustments now turns tax season into something more predictable next year.
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