By Tony Delane, CFP®, AIF®, Associate Wealth Advisor

April’s here, which means we are hard at work reviewing our clients’ newly filed tax returns. An accurate tax return offers valuable insights into a client’s financial health and overall financial situation, providing a wealth of information that can be leveraged to optimize their financial strategies and better align them with their long-term goals. As we delve into the details of our clients’ tax returns, we can uncover critical data points that allow us to make more informed decisions, helping our clients navigate the complexities of their financial lives and work towards a more secure future.

In this blog post, we will discuss the top five ways we use tax returns to create more effective financial plans and investment strategies, as well as examine the broader implications of tax returns on financial planning.

Financial Planning: A Comprehensive Approach

A comprehensive financial plan incorporates several aspects of a client’s financial life, including income, expenses, investments, and taxes. By using tax return data, we can better estimate tax implications over a client’s lifespan. This helps to create more accurate and realistic financial plans that reflect the client’s unique circumstances. Itemized deductions, tax credits, and other tax-related data points allow us to explore various financial scenarios and choose the best course of action for each client. Additionally, tax returns can shed light on potential adjustments to income sources and highlight areas for tax planning.

Investment Management: Tax-Sensitive Strategies

A client’s tax situation often plays a significant role in determining the best investment strategy for their needs. We analyze tax return data to understand a client’s tax bracket and capital gain situation. This information enables us to create tax-sensitive investment strategies that take advantage of available tax breaks and minimize tax liability. By understanding the intricacies of a client’s tax situation, we can avoid costly mistakes and ensure that our clients’ investments are optimized for maximum returns, while also considering tax diversification strategies for long-term growth.

Cash Flow Planning: Aligning with Financial Goals

The first half of the year is the perfect time for us to revisit and align our clients’ cash flow goals with their actual financial situation. By incorporating tax return data into cash flow planning, we can determine the most efficient sources for withdrawals, whether from taxable, tax-deferred, or tax-exempt accounts. This ensures that clients’ cash flow goals are met while minimizing their tax burden. Moreover, tax return data can provide insights into potential savings opportunities or the need for adjustments in spending habits to better align with clients’ financial goals.

Retirement Distribution Withholdings: Avoiding Surprises

Retirement distribution withholdings are an essential aspect of retirement planning that often change from year to year due to changes in a client’s situation or tax laws. We use tax return data to determine the appropriate level of federal and state taxes to be withheld from IRA, 401(k), or other retirement account distributions. By doing so, we can help clients avoid surprises at tax time and ensure that they neither owe nor receive a large refund when they file their next tax return. Proper retirement distribution planning can also prevent clients from facing penalties for under-withholding or over-withholding.

Capture Future Opportunities: Staying Ahead of the Curve

Tax laws are constantly changing, and clients’ financial goals may shift over time. We use tax returns to identify windows of opportunity for implementing tax planning strategies, such as Roth conversions or taking advantage of existing or proposed legislation. By staying informed and proactive, we can help clients make the most of their financial planning opportunities and minimize their tax liabilities. This proactive approach allows clients to adapt and adjust their strategies in response to changing financial landscapes and regulations, ensuring long-term financial success.

The Bottom Line

Tax returns provide a wealth of information that we can use to create more effective financial plans and investment strategies. By incorporating tax return data into our planning process, we can better understand our clients’ unique financial situations and develop strategies that align with their goals, maximize their returns, and minimize their tax liabilities. So, as April rolls around and tax season is in full swing, remember that your tax return is more than just a necessary compliance document – it’s a powerful tool that can help you create a brighter financial future.


Halbert Hargrove Global Advisors, LLC (“HH”) is an SEC registered investment adviser located in Long Beach, California. Registration does not imply a certain level of skill or training. Additional information about HH, including our registration status, fees, and services can be found at This blog is provided for informational purposes only and should not be construed as personalized investment advice. It should not be construed as a solicitation to offer personal securities transactions or provide personalized investment advice. The information provided does not constitute any legal, tax or accounting advice. We recommend that you seek the advice of a qualified attorney and accountant.