How to Avoid Tax Surprises on April 15th
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 doctorswho work locum tenens. Since locum 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 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 you'll know you're not overpaying.
Projecting your taxes ahead of time pays off in a few ways: no surprises on April 15th, clarity on how much to pay and when, and a baseline to plan your cash flow against.
How to Project Your Taxes
To project your taxes, start with last year's tax return, then adjust the assumptions for anything that's changing this year.
Start With Last Year's Return
Always start with last year's return. If this year's income and deductions will be similar, and there are no major tax law changes, you're done — last year is a good stand-in for this year.
Adjust Assumptions for the New Year
If anything is changing materially, 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 the new year yet, so it will think you're preparing another return for last year. That's fine — you're just using it as a modeling tool.
This year could bring changes to your income, deductions, and tax payments. For example:
Income: Up? Down? More 1099? More W-2? What about your partner's income if you file jointly?
Deductions: Expenses up or 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 a high number until you know otherwise. As the year goes on and your actual earnings become clearer, update your projection.
Hiring a Professional
If you don't use an accountant, your financial advisor should be doing your tax planning. If you do use an accountant, your advisor should be working closely with that person — your advisor can still handle the planning even if your accountant is only preparing the return. If your advisor isn't providing this kind of tax-related guidance, that's worth a conversation about whether they're the right fit for you.
Conclusion
Don't be like the countless docs who wait anxiously for their tax return to be done. Do annual tax planning, and know roughly what you'll owe well before April 15th arrives.
Ready to put this into practice? If you're an ER physician or high-income professional looking for straightforward, evidence-based financial guidance, we'd love to connect. Schedule a free intro call with Yahara Wealth Management — no pressure, no sales pitch, just a conversation.
This article is for general educational purposes only and does not constitute personalized tax, legal, or investment advice. Tax laws are complex and subject to change; consult a qualified tax professional or financial advisor regarding your specific situation.