Tax and Tend

A handy to-do list of post-tax-season priorities and pre-summer to-dos to get your financial house in order before you hit the beach

With tax season behind us and summer vacations looming, it’s the perfect time to take care of financial priorities you’ve been putting off or haven’t addressed during busier times of the year.

Fire up the shredder

Documentation and diligent record-keeping are important, but so is cleaning out your old records periodically. Use this “spring cleaning” period to cleanse yourself of older tax records and other outdated or unimportant financial documents. You’ll reduce clutter while minimizing the risk of your personal information falling into the wrong hands.

Unless you’re actively under audit or purposefully hiding income (which we hope is not the case!), the IRS has a three-year statute of limitations for tax records. So, keep your tax returns but go ahead and shred those supporting documents more than three years old.

Time your conversions

Now’s the perfect time to plan your annual IRA strategies, including contributions during down markets and Roth conversions. A Roth conversion is the taxable movement of assets from a traditional IRA to a Roth IRA; each converted dollar is treated as ordinary income for the 2022 tax year, but those funds will never be taxed again (the earnings and distributions are all tax-free).

The advantage of converting during a down market is capturing the eventual market rebound without adding to future taxable income. On the flip side, if your income varies from year to year and the potential exists for the Roth conversion to push you into a higher tax bracket by year’s end, it might be best to hold off.

Large tax refund? Check your withholding

All too often we’re surprised when it comes time to file our tax returns. Sometimes it’s a “good surprise” of a refund or a not-so-great surprise of owing money to the IRS. But is a tax refund really a good thing? Tax refunds are created when we pay in more to the IRS than our actual tax due. Most people are happy to receive a check after filing their return, but it actually means that they gave the IRS an interest free loan throughout the year. Those funds could have been in your pocket rather than Uncle Sam’s. Now is a great time to review your tax withholding to minimize large refunds or balances due on your return next year. 

Cover your bases

Insurance is a pivotal piece of responsible financial planning and it’s well worth checking in to make sure your coverage is sufficient to meet your needs. That means reviewing your policy structure and ensuring that it addresses your personal and professional circumstances.

Insurance priorities can vary considerably from one person to the next. An upper-middle-income parent who is the sole earner in the family will want to make sure they have enough life insurance coverage to replace future income, pay off current debt, and cover planned future expenses (college, vacation home, etc.) for the family.

A business owner with a large estate will be less worried about protecting future income and more concerned with helping the inheritors of their estate write a big check to the federal (and potentially state) taxing authorities.

For current business owners with partners, a buy/sell agreement is a must-have (and ideally with an insurance policy to fund the buyout of the deceased partner). In certain instances, a key man insurance policy is necessary to help the deceased owner’s company fund the cost of an interim CEO and executive search in the immediate aftermath of the owner’s death.


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