The Planner's Perspective: Beginning of the Year Housecleaning

Paul Morrone |

By Paul Morrone CFP®, CPA, MSA

The beginning of the year is a great time for some financial housekeeping. Over the course of the next couple of months, you are going to be receiving communications from just about everything you are involved in financially. Whether its year-end statements from brokerage firms, tax documents from your various financial holdings, annual policy statements for insurance or annuity contracts, W-2s or 1099s for earned income or K-1s from business interests, there will be no shortage of mail to keep track of. As much of a hassle as this may be to organize and process, there are some key risks that can be identified by quickly reviewing your documents with some pointed questions in mind.

  • Are you maximizing your retirement plan contributions?
  • How is everything addressed? Is a spouse or child missing from the registration? Maybe the asset should be held in trust rather than in your name outright.
  • If you receive multiple statements for investment accounts, can those assets be combined into one account?
  • When is the last time you reviewed your employee benefits?
  • Did your investment account experience large realized gains or losses? Were those discussed with you beforehand?
  • Is there a reason you have so many accounts at different financial institutions?
  • Are your property tax bills addressed properly?
  • Have you been making quarterly estimated income tax payments, to the IRS or your state of residence? Given the composition of your income is it prudent or necessary to do so?  Or, can you have taxes withheld from your various income sources to eliminate the need to make estimates?
  • Does the account or insurance contract have a beneficiary designation? When is the last time you’ve looked at it?
  • If you received a K-1 from an estate or trust, do you know which events generated the income and deductions reflected on the form? How are these assets being managed and distributed?
  • If you received a K-1 from a business, what happens to your interest in that business if you were to suddenly pass away? Would the business survive?

While some of these questions are meant to be probing and get you thinking about the proverbial ‘big picture,’ many represent commonly overlooked items that can help in your financial housecleaning.  It’s all too common to individuals to pile up a bunch of year end paperwork then provide the entire stack to their tax preparer without even opening some of the mail. Many times, envelopes stamped with “Important Tax Documents Enclosed” remain unopened until they cross an accountants desk. It is in your best interest to carefully review your financial documents carefully as they come in. Take this time to also generate a list of questions to review with your accountant or advisor, it may surprise you what you find out.