Tax Experts Reveal Costliest Mistakes Middle-Class Makes on Taxes

From overlooking retirement accounts to treating extra income casually, these tax blunders can cost thousands.

Feb. 4, 2026 at 6:31am

Got story updates? Submit your updates here. ›

According to tax experts, middle-class taxpayers commonly make several costly mistakes on their taxes, including overlooking retirement account opportunities, treating a Roth IRA like a savings account, making errors on tax returns, treating extra income too casually, making early withdrawals, and not itemizing deductions.

Why it matters

Tax planning is crucial for all income levels, not just high earners. Even small decisions around retirement accounts, side income, and deductions can add up to thousands of dollars in lost savings and refunds for middle-class taxpayers. Understanding these common pitfalls can help people maximize their tax benefits and avoid penalties.

The details

Tax experts highlight several key mistakes middle-class taxpayers often make: 1) Overlooking retirement account opportunities like Solo 401(k)s and Roth IRAs that offer significant tax advantages; 2) Treating a Roth IRA as a savings account rather than an investment account, missing out on long-term growth; 3) Making errors on tax returns like math mistakes, missing Social Security numbers, and incorrectly claiming child tax credits; 4) Depositing extra income like consulting work without properly setting aside taxes, leading to surprise bills; 5) Making early withdrawals from retirement accounts before age 59 1/2, triggering penalties; and 6) Assuming they can't itemize deductions when changes to the tax code may now make it beneficial.

  • The tax law changes mentioned in the article went into effect in 2025.

The players

Nauman Poonja

CEO of Accounovation, a tax planning firm.

Adam Bergman

Self-directed retirement expert and founder of IRA Financial.

Michele Frank

Associate professor of accountancy and CPA at Miami University.

Got photos? Submit your photos here. ›

What they’re saying

“Middle-class entrepreneurs often overlook retirement account opportunities, which can mean missing out on tax benefits. For example, if you make $120,000, you can steer up to $23,000 into a Solo 401(k) and more than $50,000 total across all tax-advantaged accounts.”

— Nauman Poonja, CEO, Accounovation

“A Roth IRA is one of the most powerful tools for building tax-free wealth in retirement. Since your contributions are made with after-tax dollars, your investments grow without tax and you won't owe taxes on qualified withdrawals in retirement.”

— Adam Bergman, Self-directed retirement expert and founder, IRA Financial

“A Roth IRA is not just a savings account; it is an investment account. Choosing the right investments can significantly boost your long-term gains. Since Roth IRA withdrawals are tax-free, it is a great place to hold investments with high growth potential. Failing to invest appropriately can significantly reduce the long-term benefit of tax-free compounding.”

— Adam Bergman, Self-directed retirement expert and founder, IRA Financial

“Many in the workforce underwithhold for outside consulting income: assuming they'll be taxed at an ordinary rate. But they will likely have tax liability for their minimum 10% contribution, based on the higher of these three factors and in fact, it could even reach 32% to 35%.”

— Nauman Poonja, CEO, Accounovation

“Withdrawing earnings early can have a significant long-term impact, as it not only reduces current savings but also eliminates decades of potential compound growth.”

— Adam Bergman, Self-directed retirement expert and founder, IRA Financial

What’s next

Given the tax law changes mentioned, middle-class taxpayers may want to consult a CPA to review their specific situation and see if they should now itemize deductions rather than take the standard deduction.

The takeaway

Tax planning is crucial for all income levels, not just high earners. Understanding and avoiding these common middle-class tax mistakes can help people maximize their tax benefits, grow their retirement savings, and avoid costly penalties.