Why Is It Important For Your Financial Advisor To Have Your Tax Return? – Finger Financial Five #54

Jeremy Finger
Jeremy Finger
Table of Contents

“Intaxication- The nice feeling you get when you receive a tax refund until you realize it was your own money in the first place.” – Unknown

Why is it important for your financial advisor to have your tax return?

Quick story to explain why….

My dad and I would fish in the rivers and ponds in South and North Carolina.  We would paddle to adjust our position quietly.  If we wanted to go left, we’d both paddle forward on the right side of the boat and vice versa.

What if I did not know what my dad was doing when he paddled?  You can probably imagine that we would not get where we wanted to go.

Same goes for tax planning.  As an advisor, I need to know what is going on so I can guide clients properly.  When we talk to and coordinate with your CPA, we make sure we are all paddling in the same direction.

Here are some recent real life examples of why it matters:

  • Client had a low-cost basis stock and was not properly diversified.  I had a conversation with his CPA. We discussed that the client is Married Filing Jointly, he would pay NO CAPITAL GAINS if their total income was under $80,800 for 2021.  We were able to sell $60,000 of stock and pay ZERO CAPITAL GAINS.

  • Another client had $150k of long-term capital gains on his tax return. I asked him about it and he confirmed it was a one time event.  He was not going to have any meaningful gains for 2021.  After some calculations, we decided we could do some Roth Conversions to fill up the lower tax brackets to reduce his future Required Minimum Distributions. Not knowing what is going on outside of the accounts we manage could have caused us to miscalculate the proper amount to convert.

  • We saw a client was giving to charity but was not giving enough to get a deduction.  Because the client was over 70 ½, they were able to give directly to the charity from their IRA using Qualified Charitable Distributions.  This was effectively giving to charity with pre-tax dollars.

  • Similar to the story above, another client was under 70 ½ and was giving to charity with no deductibility.  After talking with his CPA, we decided to “bunch” a number of years of charitable giving into one year using a Donor Advised Fund.  He was able to finally reap some tax benefits and has a future pot of money to give to charity more tax efficiently.

  • A new client asked this question: How can I best fund retirement for the upcoming year?  After looking at his tax return for the previous year and his realized gain/loss for 2021, we decided he would NOT take any gains until next year.  Why?  Taking more gains would cause the Medicare expense (IRMMA) to rise in a couple years.

  • New car?  Clients wanted a new vehicle.  They had the money, but it was in their IRA account. If they withdrew the entire amount, it would push them into a higher bracket.  They decided to finance the vehicle for 1% instead.

     I have seen advisors take capital losses when they should actually take GAINS that year.  I have seen people pay investment fees in their taxable accounts when they could have paid those expenses with pre-tax dollars from their IRAs.  I have seen people miss funding Health Savings Accounts.  I have seen people have the wrong type of retirement plan.  I have seen people convert too much or too little money to a Roth IRA.  I have seen people contribute to a Roth IRA when they should be contributing to a traditional IRA and vice versa.

     An advisor who does NOT have a tax return isn’t able to clearly see the direction the CPA is paddling.  You may end up going in circles and making the client dizzy.

     Many advisors do not feel comfortable reviewing the return or their firm does not want to take on the responsibility of giving tax planning advice.  Well, as you can see, this can be a mistake.

Let’s not forget who else has a paddle…your attorney.  Coordinating your estate documents with your CPA and your Certified Financial Planner, can make your trip down the river of life as smooth as possible.  Your job is to enjoy the view.  That is what Retire Happy is all about.

The Retire Happy Podcast has started.  Click here for the first few episodes.  Feel free to subscribe!

If you have any questions, feel free to email me at [email protected] or click here for a phone appointment.

On the lighter side, we took Elliott to see the College of Charleston this past weekend.  The College has changed a lot since I graduated.  Many good memories there.  Not sure if he would like to go there or not.  Going to visit the University of South Carolina, too.  Here are some pictures.  The new business school building (2006) is very nice.

Hope all is well with you and your family,


Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information.  My intention is to share principles, so that you will have more clarity and peace, that help you make better financial decisions.

Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.

This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.


Get Your Free Download

Submit the form and a member of our team will email you a copy of the Retirement Ready Checklist. 


Retirement Ready Checklist

  • This field is for validation purposes and should be left unchanged.
Skip to content