Even with the best of intentions, it’s possible (and common) to make mistakes when filing your taxes.
Tax software and professional tax preparers are super helpful, but they can only work with the information they’re given.
And let’s be honest, the information you gather each year is from the previous 12 months. You’ve made it through the holiday season and you’re ready to usher in a New Year, only to be pulled back into the past, trying to remember what actually happened.
But as you’ll see below, it’s worth your time to provide context and confirm details before signing and submitting your tax return.
Let’s break down some of the most common tax return mistakes we see and how you can avoid them.
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Table of Contents
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Mistake #1. Incomplete/Incorrect Information Carried Over from the Prior Year’s Return
Both TurboTax and your tax preparer will only ask you for tax documents from the accounts they know about.
- After-tax accounts (including checking, savings, or brokerage accounts) typically generate tax documents each year. One may not be generated if you earn less than $10 in interest or dividend income, although some institutions may generate forms for any amount.
- Retirement Accounts and HSAs will only generate a tax form if money went in or out (for any reason). Note that IRAs and HSAs generate Form 5498 for contributions after the tax filing deadline (keep these tax forms for your records but don’t forget to tell your tax preparer about the transaction).
Be sure to actually log into your institution’s online portal and make sure you have gathered tax forms from ALL accounts (or confirm that one will not be generated).
📝 Tip: During the year, keep a folder of your financial activities as you go (for example, when you buy a new car, remodel your home, change jobs, donate to a charitable organization, sell employer stock, or contribute to or take a distribution from HSAs, IRAs, etc)
Plus, TurboTax likes to make things easy by using information entered from prior years’ tax returns to autofill the current year’s filing. This can be helpful as long as nothing significant has changed. However, double check your tax folders (remember, the one that you created throughout the year 😉) to confirm that all transactions are the same type as the prior year.
A couple examples we’ve seen where TurboTax carried information forward incorrectly:
- If you did a Rollover last year (non- taxable event) and a Roth conversion (taxable event) this year
- If you are making non-deductible IRA contributions, basis can be different year over year
Mistake #2. Capital Gains Confusion
🚫 Missing New Accounts
Opened a new after-tax investment account this year? Your tax preparer might not know it exists unless you tell them. Make sure you’ve downloaded all relevant 1099-B, 1099-INT, and 1099-DIV forms to report capital gains, interest, and dividends correctly.
📉 Not Tracking Gains/Losses from Past Years
If you sold investments at a loss, up to $3,000 can be used annually to reduce your ordinary income—and anything above that can be carried forward to future years to offset gains and/or another $3,000 of annual income. But only if it’s properly reported and then carried forward on the following year’s return.
📝 Tip: Review your prior year’s return for any capital loss carryforwards and track them in a spreadsheet or tax software.
Mistake #3. Overlooking 1099-R Nuances
🔄 Missing 1099-Rs
Even if no taxes are due, any distribution from a retirement account triggers a 1099-R. Don’t assume you’re in the clear just because you moved money “within the system.”
This specifically applies to Direct Rollovers, where funds moved directly from one tax-deferred account to another. You might do this to consolidate accounts or move your employer retirement account into an IRA. These transactions are reportable but not taxable.
In the case of Roth Conversions, you may not feel like you took a withdrawal because the funds went into another retirement account. However, Roth Conversions are reportable AND taxable, so make sure to provide the 1099-R to your tax preparer (and be on the lookout for the corresponding 5498 in May).
✨ Misinterpreting What’s Taxable
1099-Rs don’t clarify if all or a portion of the withdrawals are taxable. Some examples of non-taxable withdrawals:
- 60-day rollovers (money came to you and you put the money back in the account within the allotted time)
- Qualified Charitable Distributions (QCDs) (for those 70.5+ years old)
The 1099-R will report the total amount that came out of the account, whether there are non-taxable transactions included or not. The non-taxable portion will have to be pointed out to your tax preparer.
📝 Tip: Keep detailed records of any rollovers, conversions, or QCDs and share them with your tax preparer. This includes dates, amounts, and the originating/destination account types.
Mistake #4. RSUs and Stock Option Reporting Errors
Equity compensation is complex. Pieces of related transactions (e.g. grants, taxes withheld, exercises, sales) may show up on your W-2, 1099, or nowhere at all.
One common mistake we see is cost basis being reported as $0, which can lead to an overpayment of tax.
📝 Tip: Provide grant documents, transaction history, and broker statements—not just tax forms to your tax preparer.
Mistake #5. Backdoor Roth IRA Reporting Mistakes
Roth contributions, conversions, and rollovers all show up differently on tax forms. The Backdoor Roth contribution is especially prone to reporting errors. If your tax preparer doesn’t file Form 8606, you might end up double-paying taxes on your contribution.
As a refresher, making a Backdoor Roth contribution means:
- Making a Non-Deductible Traditional IRA contribution (i.e. you don’t get a tax benefit for the contribution), and then
- Converting funds from your Non-Deductible Traditional IRA to your Roth IRA
📑 Know what forms to expect:
- 5498 for both Traditional IRA and Roth IRA contributions (from the conversion part of the contribution) – often comes after you file
- 1099-R for Traditional IRA distribution
- Form 8606 to track non-deductible contributions to the Traditional IRA
📝 Tip: Review your tax return before signing and filing it. Confirm amounts reported in Lines 4a and 4b, and make sure a Form 8606 is included in your return.
👀 Pro Tip: The contribution and the conversion do not necessarily have to happen in the same tax year. The amount on the Traditional IRA 1099-R can be more than the annual IRA contribution limit. This does not mean you made an excess contribution. There is no annual limit to how much you can convert in any given year.
Mistake #6. HSA (Health Savings Account) Contribution Errors
HSAs offer triple tax advantages—if you’re eligible and stay within the limits. Common pitfalls include:
- Forgetting that employer contributions count toward the annual limit
- Making excess contributions if you enroll in or switch health plans mid-year
- Not accounting for double coverage, where the other plan is not HSA-eligible
- Contributing to your HSA after enrolling in Medicare, even if you’re still working
- Contributing to your HSA after enrolling in Medicare, even if you’re still working
📝 Tip: Double-check your plan type (must be an HSA-eligible high deductible health plan (HDHP), coverage level (individual vs. family), and months of eligibility.
Mistake #7. Basis Not Tracked or Updated
Selling a home, doing a big remodel, or inheriting assets or property? Your cost basis matters! Without documentation, you may pay capital gains tax on more than you should.
📝 Tip: Save receipts and records for any home improvements or inherited assets. If you inherit stocks or bonds, request a step-up in basis from the institution where the assets are held.
Mistake #8. Unused Contribution Opportunities
Good tax strategy isn’t a one-time thing. While many actions must be done by December 31st, some tax-saving moves can still be made by April 15th of the following year, including:
- HSA contributions
- IRA (Traditional or Roth) contributions
- SEP IRA contributions
- Solo 401(k) employer contributions
📝 Tip: Work with your tax preparer to confirm your eligibility and contribution amounts each year as part of your tax filing process. Fill up prior year’s contribution limits first to leave room for contributions for the current year.
Your tax return is a snapshot of your financial story, and a chance to make smarter choices for the year ahead. Make sure to review it.
Step by Step Guide To Review Your Tax Return From Last Year >> Click here!
Implement a Tax Strategy
Reviewing your return—even after filing—can help you catch missed opportunities or prepare for a better outcome next year. And if you’ve spotted a mistake? You can file an amended return (Form 1040-X).
Taxes aren’t exactly the definition of fun, but they don’t have to be painful—and they can actually be empowering when you understand what’s going on. A little context, proactive planning, and awareness of common pitfalls can save you serious stress—and money.
Tax strategy brings the bigger picture into focus. It’s about more than just minimizing what you owe—it’s about aligning your finances with your life goals. Whether you’re dreaming of a sabbatical, exploring a new career path, or just wanting to be more intentional with your money, financial planning can help make that vision a reality.
As financial planners who specialize in helping people craft meaningful career paths and take transformative sabbaticals, we know how overwhelming this process can feel.
If you’re considering taking a sabbatical and could use a thought partner, we’d love to hear what’s on your mind. Let’s explore how we can support you—personally and financially. Get in touch with us.
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KAILIE ABASCAL
Kailie is a Certified Financial Planner (CFP®) with a passion for helping clients navigate their financial strategies with creativity and confidence. Having lived in Cuba and Mexico, she brings a global perspective to her work, combining her diverse experiences with a deep understanding of financial goals. Kailie is dedicated to helping clients plan for sabbaticals and career breaks, ensuring these life changes are enriching without compromising long-term financial security.