Next Steps After Filing Taxes

Next Steps After Filing Taxes. Every year people fall into two different camps when filing taxes: those who owe and those who receive a refund. Here are steps for both to improve your tax and financial situation.

If you are receiving a REFUND from your tax return

  • Cash Reserve: If an unexpected expense would drain your finances and cause you to use credit, use your refund to boost emergency reserves. A typical guideline is to have easily accessible funds to cover 3–6 months of expenses.
  • Pay down debts: Consider paying down debt such as credit cards or auto loans.
  • Remember, this isn’t “free” money. It’s cash you worked hard for all year and Uncle Sam has taken an interest free loan but is finally paying you back.

If you OWE when filing your tax return

  • Consider making additional pre-tax retirement contributions (such as an IRA or 401(k)) to lower your tax bill if possible. Remember, the deadline to make an IRA contribution for 2017 taxes is 4/17/18.

For all to consider

  • Adjust your tax withholding: If you owe or are to receive a substantial refund, it may be wise to revisit your tax withholding; especially due to the new tax law adjustments for 2018. The IRS released an updated tax withholding calculator. The calculator (along with help from your tax professional) can guide you to complete a new Form W-4 to submit to your employer to adjust withholdings.
  • Adjust estimated tax payments: Coordinate your estimated tax payments with any withholding with the help of your tax professional.

Take proactive steps to improve your tax and financial situation. If you’re curious about the tax adjustments for 2018, you can check out our column here that discusses many of the major reforms.

Talk with us about your portfolio or financial plan here: Talk with an advisor

More Reading: Four Keys to Overcoming Anxiety about Money

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