Tax Season Is Here. Are You Just Filing, or Are You Actually Planning?

Every year around this time, millions of people hand over a pile of documents to their tax preparer and wait to find out whether they owe money or get a refund. And every year, most of them walk away without any clearer sense of why the number came out the way it did, or what they could do differently next time. That is a completely normal experience. It is also a missed opportunity.

There is a big difference between tax preparation and tax planning. Tax preparation is looking backward. It’s accounting for what already happened. Tax planning is forward-looking. It is making decisions throughout the year, and sometimes years in advance, that put you in a better position when April rolls around. One of them is something you do once a year. The other is something that should be woven into how you think about your finances all the time.

What Tax Planning Actually Looks Like

For most people in a traditional salaried role with straightforward finances, tax planning might not require a lot of heavy lifting. But if you own a business, receive equity compensation like restricted stock units or stock options, or are in a higher income bracket, the stakes are considerably higher, and so is the potential benefit of being proactive.

For a small-business owner, tax planning might mean deciding whether to make a large equipment purchase before year-end, structuring a retirement plan contribution to reduce taxable income, or timing when to recognize certain income. For someone with RSUs vesting throughout the year, it might mean thinking carefully about when to sell shares, how that income layers on top of their salary, and whether there are capital gains or losses elsewhere that could be used strategically. These are not obscure loopholes. They are legitimate decisions that can have a meaningful impact on your overall financial picture when made thoughtfully.

The Refund Question Everyone Gets Wrong

A lot of people love getting a big refund. It feels like a win. But what a large refund really means is that you overpaid the government throughout the year and gave them an interest-free loan. Now, that is not the end of the world, and for some people, it is actually a useful forced savings mechanism. But it’s worth understanding what’s actually happening.

On the flip side, owing a significant amount come filing time is also not necessarily a crisis, though it can feel like one. If you had more money working for you during the year and invested the difference, you may come out ahead. There are two keys here. One, make sure you’re minimizing avoidable late-payment and interest fees. Two, having some awareness of where you stand throughout the year and a plan to pay taxes due. Not just figuring it out in April.

Adjusting Your Withholding

If you had a big surprise this filing season, either owing a lot or receiving a very large refund, it is worth revisiting your W-4 or estimated tax payment schedule now, rather than scrambling to fix it in December. Small adjustments made early have a much bigger impact than last-minute corrections.

The IRS offers a free tool to help you figure out the right withholding level based on your income, deductions, and other factors. You can find it at apps.irs.gov/app/tax-withholding-estimator. It takes about ten minutes and can save you a lot of stress come next April. It’s best to do this right after filing taxes, so all the information is still semi-fresh in your mind.

A Few Things Worth Reviewing Right Now

Whether you have already filed or are still pulling things together, Spring is a good time to start thinking about this year, not just wrapping up last year. A few things worth putting on your radar:

Retirement contributions and IRA strategies. 

You have until the tax filing deadline (typically April 15) to make a prior-year IRA contribution if you have not already. For 2025, the contribution limit is $7,000, or $8,000 if you are 50 or older. However, whether you can deduct a traditional IRA contribution, or even contribute directly to a Roth IRA, depends on your income.

For 2025, the ability to contribute directly to a Roth IRA phases out between $150,000 and $165,000 of modified adjusted gross income for single filers, and between $236,000 and $246,000 for married filing jointly. Traditional IRA deductibility phases out at different thresholds depending on whether you or your spouse are covered by a workplace retirement plan.

If your income is above the Roth IRA contribution limit, you may still be able to contribute through what is commonly called a backdoor Roth IRA. The process involves making a non-deductible contribution to a traditional IRA and then converting it to a Roth. It sounds simple, but there is an important wrinkle: if you have other pre-tax IRA balances, the pro-rata rule applies, which means part of your conversion will be taxable. You report non-deductible IRA contributions and track your basis using IRS Form 8606 when filing your taxes. If you are considering this strategy, it is worth understanding the mechanics before you execute it, because mistakes can be costly and difficult to unwind.

Equity compensation events coming up. 

If you have RSUs scheduled to vest or are thinking about exercising stock options this year, those events have tax consequences worth understanding before they happen, not after. The timing and method of those decisions can make a real difference. For a thorough overview, see our blog post Employer Stock Benefits: What They Are and Their Tax Consequences.

RSU cost basis: When RSUs vest, the fair market value of the shares on the vest date is treated as ordinary income and reported on your W-2. That same amount becomes your cost basis in the shares. When you eventually sell, you will owe capital gains tax only on any appreciation above that vest-date value. Your brokerage should provide this information, but it is worth confirming that your cost basis was reported correctly, especially if you sell shares shortly after vesting. Incorrect basis reporting is one of the more common (and fixable) errors people encounter.

ISO and the alternative minimum tax (AMT): Incentive stock options have a unique tax characteristic in that there is generally no regular income tax when you exercise, but the spread between the exercise price and the fair market value at exercise is an AMT preference item. Your AMT adjustment equals that spread multiplied by the number of shares exercised. If that adjustment is large enough, it can trigger AMT liability for the year of exercise. This is one reason why ISO exercise timing deserves careful analysis, particularly in years when your income is otherwise lower or when you expect to have significant AMT credits available.

Business structure, deductions, and retirement plans. 

If you run a business, now is a good time to revisit whether your current setup is still the right fit and whether you are capturing all the deductions available to you. Business owners generally have more planning flexibility than employees, but only if they are aware of the options.

On the retirement plan side, the deadlines for establishing and funding different plan types vary, and missing them can mean losing a significant deduction. A SEP-IRA can be established and funded up to the tax filing deadline, including extensions, making it one of the more flexible options for self-employed individuals. A SIMPLE IRA must be established by October 1 of the plan year, so it is too late to set one up for 2025, but worth planning for in 2026. A solo 401(k) must be established by December 31 of the plan year, though employee contributions can be made up to the filing deadline and employer profit-sharing contributions can be made up to the filing deadline with extensions.

One planning consideration worth flagging for business owners: employer profit-sharing contributions to a solo 401(k) or other qualified plan can reduce your qualified business income (QBI) deduction, since QBI is calculated after those contributions. The interaction between retirement contributions and the QBI deduction can be counterintuitive, and the optimal contribution level is not always the maximum one. This is exactly the kind of situation where you want to work through the numbers with a tax professional before making the final call.

The Real Goal Is Keeping More of What You Earn

Taxes are one of the largest expenses most people face over their lifetime. And unlike most expenses, they are also one of the areas where thoughtful planning can genuinely move the needle. That does not mean taking aggressive or questionable positions. It means understanding the rules, making deliberate decisions, and not leaving money on the table simply because nobody stopped to think about it.

Tax planning works best when it is integrated into your broader financial picture. Your investment strategy, your retirement contributions, your business decisions, your insurance, and your estate plan all have tax dimensions. When those pieces are coordinated, the whole plan tends to work more efficiently.

If you find yourself finishing up your return and thinking, "I wish I had done something differently last year," that’s actually a great place to start the conversation for this year. The best time to plan is before the decisions are made.