Locally based CPA firm since 1956

What just happened with your tax return?

We get it – the last thing you want to do right now is pull out that 1040 and dig into it. However, there is a lot of great info that you can use to make important decisions going forward that will improve your financial situation.

Most individuals evaluate the “success” of a tax year based upon if they received a refund or had to write a check. In reality, this just tells you if you loaned (interest free!) or borrowed dollars from the US Treasury last year.

A few important questions to ask are:

  • Did my income increase or decrease (and why)?
  • What type of taxes did I owe and could any of these be avoided?
  • Are my investments tax efficient?
  • Am I making progress towards my retirement plans?
  • Am I leveraging all available tax advantages?

We know what you are thinking. This sounds like a lot of work and how do I even go about
doing this?

An easy way is to start with the two-year comparison. Focus on the variances between 2016 & 2017, and then ask the question why.

Think of the two-year comparison like a 30,000 ft view of your tax return. A quick scan reveals current vs prior year variances within income, taxes, credits and other items.

Look through pages 1 and 2 of your 1040 and identify the line items that have significant
differences from year over year and ask yourself why. Often times you might find an amount exists one year but not the next.

The next step is identifying any missed opportunities that could have helped reduce your tax liability. Did you leverage retirement planning? Did you include all available expenses related to your business? Did you avoid costly penalties related to not making timely estimated tax

Now that you have a better idea of where you are at, the next step is figuring out what type of planning opportunities are available. With all the buzz (and misinformation!) surrounding the newly implemented tax reform, many people are rushing to make changes that might actually result in pitfalls instead of improvements.

At WCM, we have learned these changes have a unique impact for each of our clients and there is no one-size fits all solution. We meet with the majority of our clients at least 3 times a year and serve as their Family CFO, not just their tax preparer.

Although we are almost halfway through the year, there is still time to make this happen.