Every year, tax season rolls around, and many Orange County residents rush to get their filings in. But in the process, a lot of people, especially professionals, business owners, and high earners, make the same mistakes. These missteps can lead to audits, delays, or paying more than necessary. While online software has made taxes more “DIY,” there’s still a lot that can go wrong, especially when your income or financial situation is more complex.
At Donna L. Stern, C.P.A., we’ve seen it all, from missed deductions to incorrectly filed investment income. Here are the top mistakes we see people in Orange County making when it comes to their taxes.
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Overlooking Local and State Tax Nuances
Many Orange County residents don’t realize that California tax rules can be very different from federal ones. For instance, some deductions allowed by the IRS aren’t permitted by the California Franchise Tax Board.
People often assume that if their federal return looks good, their state return is fine, too. That’s not always true. Small errors, like failing to add back state tax refunds or certain municipal bond interest, can result in penalties or additional tax due.
Tip: Make sure your CPA understands both federal and California-specific tax laws. We do.
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Misreporting Investment Income
This is a big one, especially in areas like Irvine, Newport Beach, and Laguna Niguel, where many residents have robust investment portfolios.
Stock sales, dividends, and capital gains can be complex. 1099s from brokerages are often confusing, and cost basis errors are common. Forgetting to report even one sale can trigger an IRS letter months later.
Tip: Don’t rely solely on your brokerage’s tax documents. Have them double-checked by a professional.
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Filing Too Early (Yes, That’s a Thing)
A lot of people think they’re being smart by filing taxes early in January. But that can backfire, especially if you receive corrected 1099s or late K-1 forms from investments or partnerships.
We’ve seen cases where people filed, then got a new document in March that required an amendment. That means extra time, extra cost, and sometimes, interest and penalties.
Tip: Tip: Wait to file until all of your tax documents are ready, especially if you have complex finances. This ensures you have everything you need to file accurately.
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Using DIY Tax Software for Complex Situations
Online tax programs have their place. But they’re designed for simplicity, not accuracy in complex cases. If you own rental property, have a business, receive RSUs, or are subject to AMT (Alternative Minimum Tax), DIY software can miss critical issues.
We’ve helped many clients fix mistakes from prior years where software didn’t flag something important, like passive loss limitations or depreciation recapture.
Tip: If your tax situation includes things like equity compensation, freelance income, or multiple income sources, it’s a good idea to bring in a CPA, even if you have a W-2.
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Missing Out on Deductions You Qualify For
Many people leave money on the table because they don’t understand the rules. Commonly missed deductions in Orange County include:
- Home office deductions (if used properly)
- Charitable contributions of non-cash items
- Energy-efficient home improvements
- State tax payments made in the prior year
Tip: Keep organized records and consult a professional to uncover what you may be overlooking.
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Failing to Plan for Estimated Tax Payments
This affects freelancers, consultants, and anyone with side income or investments. If you don’t pay estimated taxes throughout the year, you may face underpayment penalties even if you pay everything in full in April.
This happens often with real estate sales, business income, or large year-end bonuses.
Tip: Work with your CPA to project your tax liability mid-year and plan accordingly.
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Not Reviewing Past Returns
Many people assume their previous tax preparer did everything correctly, but errors do happen, especially when clients switch between preparers or try different services each year.
Reviewing past returns can help identify carryforwards (like capital losses or charitable donations) that still apply.
Tip: Have a CPA review your last 2–3 years of returns if you’re not sure everything was captured.
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Ignoring IRS or FTB Letters
Getting a letter from the IRS or California Franchise Tax Board is stressful, but ignoring it won’t make it go away. Many people leave these letters unopened or assume it’s a mistake that will fix itself. It won’t.
Sometimes it’s a simple fix. Other times, it requires a detailed response. But the longer you wait, the worse it gets.
Tip: Bring in the letter right away. We handle correspondence for clients all the time, and most issues are solvable if addressed promptly.
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Relying Too Heavily on Refunds
A large refund might feel like a win, but it actually means you gave the government an interest-free loan. On the flip side, some people panic if they owe money without understanding why.
Tax planning is about accuracy, not surprises.
Tip: Instead of focusing on a refund, focus on a year-round tax strategy. That’s where real savings happen.
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Thinking All CPAs Are the Same
Here in Orange County, there are plenty of tax preparers, but not all are created equal. Some are seasonal pop-ups; others rely heavily on software. A licensed CPA like Donna L. Stern brings over 40 years of experience to each case, especially important when your income or financial life is complex.
We take a hands-on approach and offer more than just return prep. We provide planning, strategy, and a deeper understanding of your financial picture.
Final Thoughts
Taxes aren’t just about forms and deadlines. They’re about planning, strategy, and protecting what you’ve built. Whether you’re a professional juggling stock options or a business owner trying to stay compliant, avoiding these common mistakes can make a big difference.
If your finances are more than just a W-2 and a 1099, it may be time to stop doing your taxes on your own. Partner with someone who understands both the numbers and the bigger picture.
At Donna L. Stern, C.P.A., we help successful individuals and families in Orange County stay one step ahead with smart planning, precise filing, and experienced guidance you can trust.