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Why You Should Provide Your Tax Return to Your Financial Advisor Each Year

Why You Should Provide Your Tax Return to Your Financial Advisor Each Year

With tax season nearly behind us, now is an ideal time to share a copy of your federal and state tax returns with your financial advisor. As an advisor at Total Wealth Planning, having a recent copy of a tax return enables our team to optimize each client’s specific tax situation, and leverage short and long term tax planning opportunities.

Tax planning is a major part of the financial planning process at Total Wealth Planning. We believe in a holistic planning approach rather than investment management only. Reviewing tax returns are an essential part of this process since it allows us to better understand our clients’ financial picture, collaborate with their tax professional, and helps us prepare and advise certain tax strategies for the upcoming year.

Our tax return review process

First and foremost, we want to reconcile any tax planning strategies that were implemented for each client, and confirm the outcome was as expected. Occasionally costly tax preparation mistakes are uncovered stemming from miscommunications or misunderstandings.

For example, charitable planning strategies can be missed. For those clients that are age 70½ or older and gifting from their IRA using Qualified Charitable Distributions (“QCDs”), we can verify that the gifts are properly treated for maximum tax savings. Gifting appreciated securities can also be an advantageous charitable tax planning strategy. Since most clients that utilize this strategy gift from their accounts under Total Wealth Planning’s management, we are able to validate the tax reporting on these gifts.

Roth Conversions are another commonly used tax planning strategy at Total Wealth Planning. We can add value by monitoring and planning for years with little or no income. During these years, a Roth IRA conversion strategy can convert Traditional IRA assets to Roth IRA assets. By accelerating taxable income from a Roth conversion while in a low income tax bracket, you and/or your beneficiaries benefit from one or more lifetime of tax-free growth. A Roth conversion also has the impact of minimizing Required Minimum Distributions (RMDs) which can significantly reduce one’s tax liability throughout retirement.

Once we reconcile all prior year strategies, we want to ensure that the appropriate amount was withheld for the year and look toward the following year’s plan.

Whether there is a tax refund or tax due, we have the ability to change any future tax withholding from IRA distributions, or determine how much and if estimated tax payments should be made for the following year in order to meet Safe Harbor. We may not recommend the same tax planning strategies each year, so at times the estimated tax payments that are recommended may not be appropriate if there is a change in circumstance from one year to the next.

Much of the tax planning strategies rely on managing the marginal tax bracket. From determining the rate at which long-term capital gains are taxed to whether the 3.8% Medicare surtax will impact the overall tax liability, it is extremely beneficial and necessary to know your marginal tax bracket.

The tax return may also inform us of a capital loss carry forward. This may permit us to recognize tax-free portfolio rebalancing and profit taking decisions.

Lastly, if there are changes to the tax code, by having our clients’ tax return, we can be better equipped to make decisions that may be impacted by those changes.

Always send your tax returns securely

Anytime you are asked to share sensitive information, such as your tax return, we strongly suggest delivering it in a secure manner. PLEASE DO NOT SEND AN UNSECURE ATTACHMENT TO US (For your protection)

Specific ways to send to your advisor at Total Wealth Planning are:

  • Mail or fax (866-672-8251) a paper copy to us
  • Stop by the office and we’ll scan a copy while you wait


Author: Chris Allen, CFP® is a wealth advisor at Total Wealth Planning, a fee-only fiduciary financial planning firm in Cincinnati (Blue Ash), Ohio. Chris assists clients in creating a sound financial future while serving on the Firm’s Investment Policy Committee and technical financial planning team. Prior to joining the Firm in 2015, Chris worked as a Certified Financial Counselor with a non-profit financial counseling organization, where he consulted with numerous families and helped establish sustainable spending plans. Chris can be reached at

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