05.09.2011 / After Taxes: Time for a Review

Did Uncle Sam have some surprises for you on your taxes? Tax time can reveal unexpected gaps in your financial planning. Why not take time not to close those gaps and put your financial house in better than ever order? The steps below can help you perform a financial review that will put you on the path to a less taxing April 15th next year, and an overall healthier financial picture.

"As your life changes, so do your financial goals and your tax situation"
  1. Review your taxes. Look for places you could have enjoyed a tax break, but didn’t and make a plan to take advantage of the opportunities next year. For instance, did you maximize your 401(k) or IRA contributions?  Did you save receipts from charitable donations? Looking at 2010, can you find ways to reach tax-deduction thresholds by consolidating payments like pre-paying your child’s braces to qualify for a medical expense deduction?
  2. Review your goals. As your life changes, so do your financial goals and your tax situation. Planning ahead can help you make timely adjustments. For instance, if your child will no longer be a dependent or your mortgage will soon be paid off, you may be losing deductions, which means you could owe more taxes. Does it make sense to increase your withholdings? If you’ve started working from home, investigate the potential tax advantages of a home office and start a record-keeping system so you’re prepared for next tax season.
  3. Assess the challenges. Have barriers popped up over the past year making it harder to reach your goals? For instance, did stock market swings dramatically impact your retirement portfolio? Has your tax bracket change, saddling you with an unexpected tax debt? Identifying pitfalls is the first step to overcoming them.
  4. Evaluate protection levels. Make sure your insurance coverage is still sufficient, including home, car, life, health and long-term disability. Investigate potential tax deductions, such as mortgage insurance.  Review your will and estate plan to ensure that your assets will be protected and handled according to your wishes after you are gone and that you’re minimizing tax implications for your beneficiaries.
  5. Consider debt. Are you taking advantage of potential debt-related tax breaks such as interest on business credit cards, your mortgage or home equity loan? Can you reduce debt faster, perhaps with a mortgage refinance or by adding a little extra to your monthly credit card payment? Remember to check your credit report annually. If your score has improved you may qualify for better deals on loans and insurance products.
  6. Look at your investments. Last but not least, review your portfolio.  Aside from addressing tax-advantage accounts as mentioned earlier, see how your investments performed versus the market as a whole. Is it time to sell poor performers? Also compare your investments against your financial goals – do they still align? And consider whether your risk tolerance has changed. For instance, if you’re getting ready to retire, you may have a more conservative outlook than you did just a few years ago.


Do you have any post tax season review tips? We want to hear your thoughts.

Posted at 10:36 AM | Permalink
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