6 Common Tax Pitfalls To Avoid Amid Shifting Policies

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Tax season can be stressful. It’s so nerve-wracking for some taxpayers that it makes 30% of them want to cry, according to a recent report from Intuit Credit Karma. Not only does preparing for taxes often take hours to do, but the dreaded task of finding receipts and gathering important documents is a headache. Plus, tax rules can change every year, adding a layer of anxiety for many.

While it’s hard to keep track of shifting policy changes, it’s in your best interest to do so because you could be missing valuable deductions and selling yourself short when it comes to refunds. Although Tax Day is around the corner, it’s not too late to maximize your savings.

Here are six common tax pitfalls to avoid amid changing policies.

Also see how to prepare for tax season year-round.

Ignoring New or Expiring Tax Credits and Deductions

You could be leaving money on the table by brushing off new or expiring tax credits. Get the biggest refund you can by staying up to date on policy changes.

“Tax rules change more often than you may realize, and some credits — like those for education or clean energy — can quietly appear or disappear. If you’re not paying attention, you could miss out on real savings,” according to Rachel Richards, CPA, head of tax at Gelt.

Making Major Moves Without Considering the Tax Impact

To avoid an unexpected high tax payment, try not to make big financial choices before understanding the tax implications. 

“Decisions like selling your home, cashing out investments or converting retirement accounts can come with big tax surprises,” Richards said. “A little planning ahead of time can save you a lot of regret (and money!) later.”

Other financial experts also recommend not making big financial moves without consulting someone, especially when it comes to retirement accounts.

“Taking a traditional IRA and rolling it over to a Roth without the knowledge of the tax penalty, now you’ve got a huge surprise come April,” said Steven Kibbel, financial planner, entrepreneur and chief editorial advisor of Gold IRA Companies.

Kibbel shared how it happened to clients he counseled after the fact. “They felt they were doing something smart in terms of tax-free growth. Nobody explained to them the upfront tax expense. It came as a huge shock to them,” he said.

Assuming What Worked Last Year Still Applies

With tax rules often changing, you can’t assume what worked for you last year will apply the following tax season.

“Your financial situation changes, just like the tax laws,” Richards said. “What saved you money last year might not work this time around, and could even cost you if you’re not careful.”

Greg Stoller, master lecturer in innovation and strategy at Boston University’s Questrom School of Business, agreed. “Policies are shifting every year and certainly the policies of 2024 are affecting the filing in 2025,” he said. “Several people I know pay taxes through W-2 jobs and their accountant told them that they still owed additional payments at either the federal or the state level. This is due to shifting tax rates and prior deductions, which might no longer be available.”

Misinterpreting Proposed Changes as Current Law

Another error Richards sees taxpayers make is believing things on social media that aren’t always accurate. This can include thinking proposed changes are current law.

“Just because a tax proposal is in the news or on your feed doesn’t mean it’s actually in effect,” she explained. “Acting on something too soon can lead to unnecessary stress, paperwork or complications in your tax situation.”

Depending on Itemized Deductions

Many taxpayers spend countless hours poring over credit card statements trying to find itemized deductions, but unless they’re significant, it could be more beneficial to take the standard deduction. However, consulting a tax professional is advisable.

“Unless your deductions meet an ever increasing threshold, it will be very difficult to make itemized deductions,” Stoller said.

Treating Tax Planning as an Annual Activity

Tax season is just a few months out of the year, but it’s something to think about all year, per Richards.

“Tax season shouldn’t be the only time you think about taxes,” she said. “Some of the best opportunities to save happen before you file, not when you’re rushing to meet a deadline. Keeping your tax plan top of mind is the only true way to stay ahead of the legislation and life changes that can impact your tax situation.”

Notable 2024 Tax Changes

To find out the latest tax changes, you can visit the IRS website, but according to Stoller, here are some to take note of.

• The maximum Additional Child Tax Credit (ACTC) amount has increased.
• The standard deduction amount has increased whether you’re filing individually, as head of household or jointly.
• The IRA contribution amount has increased.
• The 1099-K reporting requirements/threshold has been reduced.
• The EITC (earned income tax credit) and Adoption Credit were updated.
• Probably most importantly, tax bracket thresholds increased.

Getting prepared for tax season is more than getting paperwork in order. It’s asking the right questions to your tax professional and taking your time. 

“I always advise people, it does not cost you anything to slow down,” Kibbel said. “Hurrying through a change in policy without inquiring into specifics? That is where the harm is committed.”

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