Why We Ask to See Your Income Tax Return

A good financial advisor can help you in many ways: manage your investments, assist in major financial decisions like buying a car or a house, find the opportune time to retire, figure out how to get the most out of social security, and one of my favorites: legally avoid and lower taxes when possible. This is where sharing and reviewing your income tax return becomes an important part of what we can do for you.  

Choosing tax strategies
Reviewing your tax return will help us see what tax saving strategies are available to you. You may be able to increase your retirement savings rate while keeping a similar net take home pay. You may not be taking advantage of the Roth IRA (your tax-free investing account), or maybe you are, but your partner is not. Should they be contributing based on your combined income? You may be in a high-income tax bracket where the normal way of contributing to a Roth IRA is not available to you; but with a little finesse we can find legal ways for you to still contribute to your Roth IRA. Bottom line: You may be in a unique situation that requires a unique tax strategy.

Writing off losses
What if you have a business loss or perhaps the markets were down for a year? Or maybe you day-traded GameStop stock and have capital loss carry-forwards. If we see your tax returns, we might be able to help you use that loss to your advantage—or offset it with realized capital gains each year for several years so that you are able to make the most of a bad situation. 

Planning for Retirement
How much do you need in retirement funds to keep your current standard of living? Seeing your tax return helps us make a realistic estimate of how much you’ll need to live in retirement. It can also assist us in helping you unearth some  spending habits of which you may not be aware. Small adjustments can have a big impact in the long run.

Please provide your advisor a copy of your Income Tax Return
Seeing the whole financial picture allows us to make better informed recommendations. Your tax returns are historical records that help us see where you’ve been, so we can help you to get to where you want to go! 

As we reach out to you this quarter about your financial or retirement plan, we encourage you to upload a copy of your 2020 income tax return to your Client Portal. We’ll be able to review it while working on your plan in Q2, as well as in Q4 when we consider tax-loss harvesting, RMDs/QCDs and Roth Conversion Strategies.