Don’t Let the Tax Dust Settle Yet…

It’s hard to believe that the tax filing deadline was almost a month ago already. For many of us, it seems like we just finished scrambling to file on time. And, chances are, once you finished your return, you slid the information back in a folder, put it away, and didn’t give it another thought.

If that’s true, you’re missing an opportunity.

Each year, when you file your taxes, you’re presented with the requirement of reviewing your financial situation, at least to a certain extent. At a minimum, you’re reminded of how much you make, how much you keep, and how much you pay in taxes. That’s a great start toward knowing more about your financial life.

What if you took it one step further? Or two, or three? Here are three things you could learn from your taxes:

What story does your W-2 tell about your retirement?

If you’re an employee, you get a W-2 from your employer. On it, you can find the amount you pay into Social Security. More importantly, you can see how much you contributed to your work-sponsored retirement plan. By dividing the amount you contributed by the amount you were paid, you’ll know what percent of your income you saved for retirement. Experts recommend at least 10%. 15% would be better.

Could you afford to increase your savings rate, even by 1%? Your future self will thank you.

Are you being a tax-efficient investor?

If you have money invested in accounts that aren’t tax-protected retirement accounts (401k’s, IRA’s, Roth IRA’s, etc.), taxes could be a harsh reality. Investments generate income in the form of interest and dividends. Depending on what you invest in and how it performs, you may also experience capital gains or losses.

If you received 1099 tax forms that were shocking, it’s probably time to review what you own to see if you can be more tax-efficient in your investing strategy. Perhaps you can utilize municipal bonds, or an index approach instead of an active strategy. Perhaps you can make IRA contributions to protect more of your money from the erosion of taxes.

Did you owe or did you receive a refund?

No one likes a big tax bill. If you had one, you need to understand why it happened. Did you simply make more money than the year before? Did you exercise stock options? Or was it something else, like improper instructions on your W-4 or significant capital gains from investments? Either way, planning ahead can ensure a better result when you file next year.

A significant tax refund should be evaluated just as carefully. Tax refunds represent inefficiency. Your money was in a place where you could not utilize it to your benefit. It wasn’t in your monthly budget, either being saved toward goals or spent wisely. Large refunds are especially intolerable if you’re carrying debt throughout the year. Debts cost interest. Refunds gain no interest. Bottom line – tighten up your tax withholding by utilizing the IRS calculator and speaking with your Certified Financial Planner Practitioner™.

So, take out those documents that you’ve filed away in the back of the drawer and spend some time going over them. Few financial documents are as helpful in understanding your financial situation as your tax return. Spending just a couple of hours looking at your recent taxes could benefit you for years to come!


Andrea Blackwelder Financial Planner

Andrea Blackwelder is a Certified Financial Planner ™ Practitioner and the co-founder of Wisdom Wealth Strategies, a fee-based financial planning and investment advisory practice. Andrea looks at your complex financial planning puzzle and assists you with the best options and financial strategies that align with your financial needs. To contact Andrea, email

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