How to Avoid Tax Surprises on April 15th

by | | Taxes

Many docs wait anxiously for their tax return to be done. They have no idea if they’ll owe, or how much. If they owe a lot, they scramble to come up with the cash, then worry the same thing will happen next year.

This is especially common for doctors who work locum tenens. Since locums docs are independent contractors, the agency doesn’t withhold taxes from your pay. Instead, you must make tax payments on your own during the year. If you don’t know how much to pay when, it’s really hard to plan your cash flow.

The key to avoiding tax surprises is to project your taxes in advance. You’ll know what to expect, and know you’re paying the least tax possible.

Projecting your taxes benefits you in many ways. You’ll avoid surprises on April 15th, know how much tax to pay when, and have a baseline to plan against.

How To Project Your Taxes

To project your taxes, start with last year’s tax return, then change assumptions as needed for the new year.

Start With Last Year’s Return

Always start with last year’s return. If this year’s income and deductions will be similar to last year, and there are no major tax law changes, then you’re done. Last year is a good projection for this year.

Adjust Assumptions For The New Year

If anything is changing materially this year, then make a copy of last year’s return and build this year as a new scenario. If you do your own taxes, TurboTax won’t be updated for this year yet, so it will think you’re preparing another return for last year. That’s OK.

This year could bring changes to income, deductions, and/or tax payments you’ll make. For example:

  • Income: Up? Down? More 1099? More W-2? How about your partner if you file jointly?
  • Deductions: Expenses up? Down? Any change in retirement contributions? Self-employed health insurance deduction?
  • Tax payments: Any change in withholding on W-2 income? How much estimated tax will you pay this year on 1099 income?

Be conservative: project your income high and your deductions low.

If you’re not sure how many shifts you’ll work this year, assume high until you know otherwise. Later in the year, when you have a better idea of your actual earnings, you can update your tax projection.

Hiring a Professional

If you don’t use an accountant, your financial advisor should do your tax planning. If you use an accountant, your financial advisor should work closely with that person. Your advisor can still do your tax planning if your accountant just prepares your tax return. If your advisor doesn’t provide these valuable tax-related services, you need a new advisor!


Don’t be like the countless docs who wait anxiously for their tax return to be done. Avoid surprises and know what you’ll owe in advance by doing annual tax planning.

Want a no-obligation review of your finances? Request a FREE Financial Pulse Assessment™ online. We’ll review your scorecard and send you a short video, including comments on your Tax Rate and how to reduce it. No need to talk with anyone unless you want to.

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