Tax season may be behind you, but don’t stash away your tax return quite yet. It’s full of information that might help you improve your finances or make a difference in next year’s tax picture. Here are four things you could learn from reviewing your return.
Are your retirement contributions on track? The W-2 you received from your employer spells out what pre-tax contributions you made during the tax year to your workplace account such as a 401(k) or 403(b). If you were able to make deductible contributions to a traditional IRA, you can find that information on your tax return. An IRA provider will also send you an informational Form 5498, if you’re eligible, that shows contributions you’ve made to a traditional, Roth, SIMPLE, or SEP IRA that you can use to track and review your contributions. The deadline for sending this to you is May 31, so look for this in your inbox or mailbox — you’ll receive one form for each IRA.
Use this information to decide if you can increase your retirement contributions going forward. Contributing more will not only help boost your retirement savings (especially if you can receive a higher match from your employer) but could also help reduce next year’s tax bill if you are making pre-tax contributions or your contributions will be tax deductible.
Are you withholding the appropriate amount of tax from your paycheck? Receiving a refund that is larger than expected or owing the IRS money are both signs that your withholding deserves a second look. While a big refund is great, it means that you’re missing out on the chance to put that money to work for you throughout the year by regularly saving or investing more, or using the funds to pay off high-interest debt. Adjusting your withholding now can also help you reduce the amount you have to pay the IRS next tax season. The IRS has a Tax Withholding Estimator on irs.gov that can help you figure out the right amount of federal income tax to have withheld.
Could your money be working harder for you? Reviewing how much you earned in interest will reveal if you need to explore other options. If you’re surprised by how little you earned, it might be time to shop around for a higher rate, or move your money to a different type of account that offers more potential for growth and matches your financial goals and tolerance for risk.
Do you need to rethink your financial strategy? With so much information at your fingertips, it’s a good time to focus on your finances in general. Consider scheduling a post-tax season review with a financial or tax professional to explore strategies.
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