18 Common Tax Mistakes Physicians Make (Part 2): The Quiet Errors That Create Massive Tax Bills Ep. #49 cover art

18 Common Tax Mistakes Physicians Make (Part 2): The Quiet Errors That Create Massive Tax Bills Ep. #49

18 Common Tax Mistakes Physicians Make (Part 2): The Quiet Errors That Create Massive Tax Bills Ep. #49

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 This week, we dive into the second part of our three-part series on the most common tax mistakes doctors make. Today, we pick up where we left off last week, tackling mistakes 6 through 12—ranging from Roth IRA contribution blunders and retirement account coordination errors to the complexities of state taxes for locums and practice owners. You'll hear practical tips on avoiding the pitfalls of direct Roth IRA contributions when you're ineligible, understanding how to juggle multiple retirement plans without overcontributing, and the essential—but often overlooked—benefits of cash balance plans for high earners. Looking for help with Disability Insurance, Physician Banking, Student Loan Refinancing, Physician Mortgages, Contract Reviews, and more? Check out our "Best of the Best" sponsors page to find a list of the professionals Chad & Tyler team up with for their clients. You will want to hear this episode if you are interested in... 04:05 Backdoor Roth IRA contributions tips 08:44 401(k) vs. 403(b) Limits 15:08 Pensions for academics vs. private practice physicians 19:55 Income consistency and sustainability 25:35 Tax efficiency in bond investing 28:58 Married filing status & student loans 31:23 1099 tax strategies for doctors 34:31 Cross-border tax challenges Don't Trip on Income Limits for Direct Roth IRA Contributions Many doctors—especially those transitioning from training to attending roles—get caught by contributing directly to a Roth IRA even when their income makes them ineligible. Moving from trainee income to an attending salary can put you over the Roth IRA limits without realizing it. This triggers a 6% annual penalty, which can add up quickly if not caught. If you're close to the income threshold or anticipate a big jump in pay, default to the Backdoor Roth IRA process. Yes, this introduces an extra 5-year hold period for accessing converted funds, but it's a safer bet than risking penalties. And if you file as married, filing separately, something sometimes used for student loan optimization, you need to pay extra attention. If you're unclear, run the numbers with an advisor or accountant. Retirement Plan Coordination Physicians often juggle work at multiple employers, leading to multiple retirement accounts. For 2026, the combined employee contribution limit is $24,500, regardless of how many plans you have (excluding 457(b)s, which operate independently). Missing the nuances can lead to over-contributions or missed opportunities. Know the types of plans you have and their coordination rules. For side-gig/1099 income, solo 401(k)s are powerful—but you can't "double-dip" on the employee limit if you're also contributing to a work plan. Cash Balance & Defined Benefit Plans Cash balance plans (a type of defined benefit plan) can help high-earning doctors shelter over $100,000 per year. Most docs have never heard of these vehicles—or, if they have, write them off as too complex or niche. But they're a goldmine for established physicians, practices, or those with significant 1099 income—so long as you expect consistent high earnings for several years. Setup and administration involve actuaries, costs, and (often) "boring" bond-heavy investment choices. But saving $200k+ from high state and federal taxes can be a game-changer, especially in places like California. Evaluate this with your advisor; if you're close to the $200,000+ threshold and plan to keep earnings high, it may be time to explore. Tax-Efficient Investing: The Importance of Asset Location You might be maxing your retirement plans, but as your taxable brokerage account grows, tax-aware investment choices pay off big. Tyler recommends housing bonds inside tax-sheltered accounts and using municipal bonds in taxable accounts to blunt tax drag. High-turnover mutual funds in taxable accounts are a relic. Prefer tax-efficient index ETFs, and periodically review your investment "location" as your situation evolves. Remember, after a few decades of saving, this optimization can mean tens of thousands in net after-tax wealth. The best of the best list is a paid sponsorship, but these are professionals/companies that Tyler and Chad collaborate with within their own practices or have been vetted to earn a spot on this list. By supporting our sponsors, it allows Chad & Tyler to dedicate more time to you and the Physician Cents community. If you ever have a question (or not a great experience, which we don't expect!) about a sponsor, please let us know. We call it the "best of the best" for a reason, and we will maintain that standard for our listeners & viewers. Resources & People Mentioned The White Coat Investor Connect With Physician Cents WealthKeel LLC Olson Consulting LLC Tyler Olson on Twitter Chad Chubb, CFP®, CSLP® on Twitter Subscribe to Physician Cents Apple Podcasts Audio Production and Show Notes by - PODCAST FAST TRACK
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