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Spring Cleaning: 5 Planning Tips After Tax Day

Spring Cleaning: 5 Planning Tips After Tax Day

April 19, 2024

Accountants aren't the only ones who know the significance of April 15th. Maybe that date brings you a sigh of relief, or maybe it is a reminder that you still need to go find that last 1099 that you were missing. Either way, April 15th marks the end of tax season, which for some means that taxes can become an afterthought once again. However, despite the actual tax filing deadline passing, there are still a number of tax considerations that you should be thinking about as we look towards the rest of the year. With us being less than one third of the way through the year, there is still plenty of time to make changes that could benefit you during the remainder of 2024 and beyond. Here are some considerations as we head into Spring:

1. Review Your Tax Withholding


When you finish your tax preparation for the previous year, you will usually notice that there is a discrepancy between what you paid for State and Federal taxes compared to what you actually owed. That might mean that you need to make a payment to either of those entities, or they might need to make a payment to you. However, neither of those scenarios truly results in you making or losing money. If you are getting a refund, it simply means that you paid too much in taxes during the year compared to your income. If you owe money, it means that you did not pay enough in taxes, and now have to make up the difference.

While it can feel nice to hold a large check from the government when you get your refund, they are simply returning your own money back to you. The goal of your tax return should not be to find a massive refund; rather, in a perfect scenario, you would find out that you actually paid the exact dollar amount that you owed. So if you are someone who received a large refund, it might be time to look back at your income sources and review how much is being taken out of those payments for both Federal and State tax. If you owed quite a bit, you can actually tell your employer, Social Security, or any other entity that is sending you money to increase how much they withhold for taxes. 

2. Clean Up Your Accounts


After decades of working for many different companies, and possibly many different industries, it is inevitable that you will begin to have multiple account types spread across different financial institutions. As you look back over all of the tax documents that these firms sent you, it is a good idea to ask yourself which of those accounts is truly necessary. For example, if you have an IRA with your advisory firm, and an IRA with your bank, there could be a chance that you only need one IRA and can merge those two together. Not only will that help make tracking your financial goals easier, but it will also allow for less paperwork at tax time.

Specifically focusing on IRAs, you can simplify the Required Minimum Distribution process that currently begins at age 73. If you have five IRAs at five financial institutions, that means that you are probably dealing with five different decisions regarding when to take the money out, how much to withhold for taxes, what investments to sell, etc. In many cases, those balances could all be combined to the IRA of your choosing to help you only have to make those decisions once. 

3. Identify Any Excess Income

Having more income than you need sounds like a good problem to have. However, that can also present an opportunity to improve your financial plan over time. If you are someone who is still working and has income greatly exceeding your expenses, that is a great sign that you could increase your contributions to your company's retirement plan. If we use a 401(k) as an example, you can make contributions to that account now so that you are not taxed on any of that money until it is withdrawn down the road. Additionally, a lot of companies now offer a Roth 401(k) option if you are wanting to both increase the money going into your plan, while also paying the taxes now so that you can potentially have tax-free withdrawals down the road. The decision of whether to use a traditional or Roth 401(k) can be complex, so it is best to work with your tax planner on what makes sense for your situation.

If you are in retirement, you might not have the ability to contribute to a plan, but you could still have options for lowering your taxable income. One way to do so is by looking at the income that your investments produced last year. If that is money that you are not needing, it could be an opportunity to shift investments that are more income-focused into ones that are more growth-focused. Additionally, if you have investments outside of an IRA (what would be called a non-qualified account), you can also review potential  tax-loss harvesting opportunities by identifying investments that have large gains or losses. Tax-loss harvesting is another complex strategy that is best implemented with the help of a professional, but can provide substantial savings over a long period of time if implemented properly.

4. Analyze Your Budget

Regardless of whether or not you are comfortable with your income, everyone should evaluate what their expenses look like. In the subscription age that we are living in today, it is almost too easy to get signed up for additional services that we think we might need. The problem becomes that once we have signed up for these services, it can be difficult to remember that we have them, and more importantly, it can be difficult to remind ourselves which ones we need to cancel. In addition to subscriptions, it can be very insightful to simply write down where your money goes every month so that you can get a better idea of where you are spending the most.

We all generally know how much our mortgage or car payment is, but variable expenses like groceries, restaurants, and travel can add up faster than we might assume. When reviewing your expenses, it is important to review where your money is going, and ask yourself what is truly necessary. Once you have covered the basics, or your "needs", you can then start looking at your "wants". It is perfectly healthy to spend money on your "wants" each month, but it is also healthy to evaluate which ones are most valuable to your lifestyle. That way, if or when you do need to cut back on your expenses, you know exactly which of your "wants" are the least important to you and your family.

5. Evaluate Your Emergency Fund

An emergency fund is essential for any phase of life that you are in. Your emergency fund is what allows you to pay for that flat tire, vet visit for your pet, or a replacement of a home appliance without having to negatively impact other aspects of your financial plan (liquidating investments, taking on a credit card loan, etc.). A rule of thumb for emergency funds has always been 3-6 months of expenses while you are working, and 6-12 months of expenses during retirement. These can greatly vary based on household income, job security, fixed vs variable expenses, and so on. However, if you feel that you are greatly below those thresholds, now is a great time to start increasing the size of your emergency fund. Even adding a small tax refund to your balance can go a long way towards stabilizing your entire financial picture. Remember that the goal of an emergency fund is not to maximize how much money your cash is making; instead, focus on making sure that it is in a safe, easily accessible place so that it is available to use in as immediate a manner possible.

You might also be on the other end of the spectrum, where you have an emergency fund, but it happens to be far more than the guidelines mentioned above. In that case, you have another great opportunity to evaluate the ultimate goal of your money. For the dollars beyond what you need in your emergency fund, how would you like them to be used? Is this money that you will need in the near future, or could this possibly be for goals that are years or decades down the road? Depending on your answer to those questions, you could potentially be missing out on much higher long-term returns by letting your money sit in a checking or savings account.


There are hundreds of other considerations beyond what we have discussed, but my hope is that you now have a few goals in mind that you can focus on over the coming Spring and Summer months. By accomplishing even a few of these, you can ensure that your financial plan will be even more organized when tax time returns again in 2025. As always, if we can help in any way, please do not hesitate to give us a call!

Matt J Black,CFP®, AAMS®