5 Costly Tax Mistakes People Make in January That Can Hurt Them All Year

January often feels like a quiet month when it comes to taxes. The holidays are over, April feels far away, and many people assume there’s plenty of time to deal with tax matters later. After working with U.S. taxpayers—particularly professionals, business owners, and Americans living or working abroad—I can say with certainty that this assumption leads to some of the most expensive tax mistakes I see each year.

How you handle your taxes in January often sets the tone for the rest of the year. Small missteps early on can quietly grow into major financial consequences if left unaddressed.

One of the most common mistakes is failing to organize tax documents early. When records are scattered or incomplete, it becomes far too easy to overlook deductible expenses or rush through decisions under pressure. Early organization helps ensure accuracy and reduces unnecessary stress later in the season.

Another frequent issue is filing a tax return too early, before all required forms have arrived. This is especially common for individuals with multiple income streams, investment income, or foreign financial activity. Missing just one form can trigger amended returns, delays, and additional costs that could have been avoided with patience and planning.

Seemingly minor errors—such as incorrect Social Security numbers or simple typographical mistakes—also cause significant problems. These errors are among the leading reasons tax returns are delayed or rejected by the IRS. Taking time to review personal and dependent information early in the year can prevent weeks or even months of processing delays.

Choosing the wrong filing status is another mistake that often goes unnoticed. Many taxpayers continue using last year’s filing status without reassessing whether it still applies. Life changes such as marriage, divorce, dependents, or relocation can significantly affect which filing status offers the greatest tax benefit.

Finally, skipping estimated tax reviews and annual tax planning can be one of the most expensive mistakes of all. This is particularly true for self-employed individuals, business owners, and U.S. expats. January is the ideal time to evaluate income projections and plan ahead rather than reacting to surprises in April.

When these mistakes occur, they often lead to:

• Delayed IRS processing and correspondence
• Missed or reduced tax refunds
• Penalties for underpayment or late payments
• Time-consuming and costly amended returns

What makes these outcomes so frustrating is that they are almost always avoidable.

The most effective approach is to begin the year with a clear tax strategy rather than waiting until tax season is in full swing. A proactive January review helps identify opportunities, minimize risk, and create confidence for the months ahead.

After decades of experience, my advice remains consistent: start your year with tax planning, not just tax filing. A small investment of time early on can save significant money, stress, and frustration later in the year.