Questions to Ask After You’ve Filed Your Tax Return

Filing your tax return can feel like a weight lifted off your shoulders. But before you breathe that sigh of relief, it’s essential to take a moment to review your tax situation thoroughly. Asking yourself the right questions can help you gain insights into your finances, understand your tax obligations, and prudently plan for the future. Here are some key questions to consider after filing your tax return:

Am I Happy with the Refund I Received or Payment I Made? One of the most immediate concerns for many taxpayers each year is whether they’re receiving a refund or owe money to the IRS. If you received a refund, consider whether the amount aligns with your expectations and financial goals. If you owed money, evaluate if you were prepared for the payment and whether you should make adjustments for the coming year. Whether you’re already retired or still working, it’s possible to adjust the withholdings from your paycheck, IRA distributions, and even your Social Security check to give yourself a more ideal outcome for this year. It can be a bit more challenging if you are a small business owner, work on commission or expect significant changes in your life or income, but it’s still worth asking the question.

How Much Tax Did I Actually Pay? Almost everyone knows how much of a refund they received or how much they ended up owing, but far fewer folks know how much tax they actually paid in total taxes. This includes taxes withheld from your paycheck, retirement accounts, estimated tax payments, and any other tax obligations. Understanding how much you actually paid to the IRS can be a motivator to take action to improve your current year tax return. To find this number look on line 24 of your Tax Form 1040.

What Was My Marginal Tax Rate? Understanding your marginal tax rate—the rate applied to your last dollar of taxable income—can provide insights into your tax situation and help you make strategic financial decisions. Knowing your marginal tax rate can be extremely useful if you’re considering a side gig, deciding between Roth and traditional 401(k) contributions, or considering a Roth conversion, for example.

What Was My Effective Tax Rate? Your effective tax rate is the percentage of your total income that you paid in taxes. Calculating this rate gives you a clearer picture of your overall tax burden and can help you evaluate your tax efficiency. You can discover your effective tax rate by dividing your total tax paid (from above) by your total income. This number is useful for context, and it can also be helpful as you make longer term tax planning decisions like when to realize different types of income.

What Will Be Different This Year? Do I Have Upcoming Life Changes? Reflect on any significant changes in your life that may impact your taxes, such as marriage, divorce, having a child, buying a home, or changing jobs. Do you expect changes in your income? Do you plan to sell a real estate holding? Do you have shares of company stock that will vest? These changes can have significant implications for your tax situation and may require adjustments to your withholding or tax planning strategy.

Will You Have a Significant Birthday This Year? Perhaps you will need to start taking required distributions from your IRA or 401(k)? Will you turn 50 and become eligible for catch-up contributions to your IRA or retirement plan at work? Will you turn 65 and become eligible for Medicare? Or maybe you’ll reach age 70 and need to turn on your Social Security benefits. These milestones can have an impact on your tax bill, so it’s important to identify and plan for them now rather than next April when you’re filing this year’s return.

What Will This Year’s Tax Return Look Like? Take some time to project your tax return for the coming year based on your current financial situation. Looking ahead can help you anticipate any changes in your tax liability, make proactive adjustments to optimize your tax outcome and take advantage of any opportunities that may be available. Perhaps this would be a good year to contribute more to your retirement plan, realize some capital gains or complete a Roth conversation.

By asking yourself these questions and taking the time to assess your tax situation after filing your return, you can gain valuable insights into your financial health and make informed decisions to improve your tax planning and preparation for the future. Whether you work through these questions with your CPA, on your own using your DIY tax preparation software, or with one of us at Beacon, staying proactive and informed is key to managing your taxes effectively and ensuring that you are making the best decisions possible as you manage your personal finances.

Here at Beacon, we are not tax preparers, but we do pay a lot of attention to our clients’ tax situations. One of the ways we do this is by using our tax planning software, Holistiplan, to review their prior year tax returns, answer and take action on the above questions and look for opportunities as we project their future tax liabilities. Please let us know if you’d like to chat.

The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.

Geoff Hall, CFP®
[email protected]

My wife, Crystal, and I have been married for 11 years and have two kids, Cooper (10) and Rhodes (8.) When I’m not spending time with them you might find me downtown serving at our church, pushing my limits during a mountain bike ride or having coffee with a friend in the Five Points area. I've been a financial advisor for 29 years and I'm thankful for the privilege of shepherding my family of clients through the ups and down of the markets, and of life for that matter.