Tax return reveals much about financial picture
When you’re done with your tax return, your first instinct may be to stash it in a drawer and put it out of your mind until next year. That would be a mistake.
A smarter move would be to think of your return as a financial snapshot. Here are some questions to consider:
— Should you adjust your withholding? If you’re getting a fat refund, it’s smart to reduce withholding so you receive that money during the year. If you’re writing a big check each April, you might see that as an interest-free loan. But if you pay the bill with a credit card or other loan, chances are you’re better off paying as you go.
— Are you saving for retirement? If your job offers a 401(k) plan with an employer match, you benefit twice, because you’ll save on taxes and get those matching funds. If you don’t have a plan at work, that makes an Individual Retirement Account or Roth IRA even more important.
— Did you itemize deductions? IRS statistics show that only about 35 percent of returns include itemized deductions. That means millions are missing out on tax savings, and for many it’s because of sloppy record keeping.
— Is it time to buy a house — or pay off your mortgage? With housing prices and interest rates still low, you may find it’s the right time to purchase a home. In contrast, Eisenberg said some could benefit from paying down their mortgage. If the interest deduction is no longer substantial, it’s worth considering.
— Did you file your first joint re turn, or have kids? If you’re recently married or you’re a new parent, it’s a good time to reassess your insurance needs and make sure you’ve updated your financial paperwork and records.