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How Financial Planning Can Save You Money During Tax Season in Flagstaff, Arizona

How Financial Planning Can Save You Money During Tax Season in Flagstaff, Arizona

April 21, 2021

You know a sound financial strategy is critical to achieving your long-term monetary goals. But did you know it can save you money in the short term too?
Taxes and investments are intricately bound together, each affecting the other in myriad ways. The tax-deferred contributions you make to a retirement plan can reduce your taxable income, while the gains you realize on other investments may increase your liability. A financial planner helps manage your assets and expenses while piloting each action's impact on your current and future tax liability.

The deadline to file your 2020 federal tax return was extended to May 17, 2021. Arizona has also extended the deadline to file individual income taxes to May 17, though the deadline for first quarter individual estimated tax payments remained April 15. To avoid penalties, Flagstaff, Arizona taxpayers should be sure to file federal and state tax returns or request an extension by May 17, 2021.

Whether you're getting ready to file your 2020 tax return or you're looking ahead to your 2021 taxes, a financial advisor can help develop a tax and financial strategy that supports your long- and short-term financial goals.

What is financial planning and how does working with a financial advisor help you prepare for tax season?

Financial advisors provide a range of financial planning services, from estate planning to budgeting guidance and investment services. Financial planners can also help you prioritize your financial goals, pay down debt, and find ways to cut expenses. With a financial advisor who sees your complete financial picture, you can develop both long-range and annual tax-planning strategies.

Contributions to retirement accounts and 529 college savings accounts can reduce your taxable income. Consulting with a financial planner before you file your tax return can help identify additional contributions you can make to tax-deferred accounts to reduce your tax liability further. You can often make contributions to existing accounts up until the tax filing deadline. You may be able to give gifts or make charitable donations that will also reduce your liability.

If you've already filed your 2020 tax return, your financial advisor can review it and identify changes to your investment strategy or retirement planning approach that better serves your long-term goals.

What can I do with my stimulus check?

If you're one of the 150 million Americans who received a stimulus check in 2020 or 2021, you'll be happy to hear it is not considered taxable income. If you did not receive a payment you were entitled to, you can claim it on your 2020 tax return.

The best way to spend the money you received from stimulus payments depends entirely on your needs and goals. If your immediate needs are covered, there are several ways you can use your stimulus check to help improve your financial wellbeing and future.

  • Pay down high-interest debt.
  • Create an emergency fund equivalent to 3-6 months of living expenses.
  • Increase contributions to your 401k or IRA.
  • Make charitable donations to causes that matter to you (and which may reduce your tax liability).
  • Contribute to 529 college savings accounts for your children or grandchildren.

If you are unsure how to use your stimulus check best, talking with a financial advisor can help you gain the clarity you need to make the best decisions for your financial future.

How different retirement plans impact your taxes now and in the future

There are various retirement plans available for individuals to save for retirement. Each plan type has different rules for how much you can contribute and take distribution payments.

If you have a plan that allows pre-tax contributions, you won't pay taxes on your retirement contributions now but will owe taxes when you take distributions at retirement. If you make your retirement plan contributions with post-tax dollars, you'll pay taxes on them during the current year but receive distributions tax-free during retirement.

Some standard retirement plans that reduce your tax liability now but may incur a future tax liability:

  • IRA: Pre-tax dollars fund traditional IRAs. Taxes are assessed and due when you take distributions. For 2021, the maximum IRA contribution for individuals under age 50 is $6000 and $7000 for individuals aged 50 and older.
  • 401k: Traditional 401k plans are employer-sponsored plans. Savings grow in tax-deferred investment accounts until you receive distributions. Individuals under age 50 can contribute $19,500 in 2021, and those aged 50 and over can contribute an additional $6500.
  • 403b: 403b plans are employer-sponsored plans with the same limits and tax implications as 401k plans. 403b plans are available to employees of specific tax-exempt organizations.
  • SEP IRA: SEP (Simplified Employee Pension) IRAs are retirement accounts for the self-employed, small business owners, and the employees of small businesses. Self-employed workers and small business owners make contributions up to the lesser of $58,000 or 25% of their salary with pre-tax earnings, with taxes deferred until distribution. Employees cannot make contributions—employers make 100% of SEP IRA contributions to employee accounts.

Some common retirement plans that do not reduce current tax liability but are distributed tax-free in retirement:

  • Roth IRA: Post-tax earnings fund Roth IRAs, so withdrawals at retirement are tax-free. Roth IRA limits are the same as those of Traditional IRAs.
  • Roth 401k: Like Roth IRAs, post-tax earnings fund Roth 401k plans. Roth 401k limits are the same as traditional 401k limits, and distributions in retirement are tax-free.

Benefit & Financial Strategies in Flagstaff, Arizona can help you plan for retirement and your 2021 taxes

Benefit and Financial Strategies has been helping individuals and families in Flagstaff, Arizona plan for their futures since 1988. We take a proactive and personalized approach to help each of our clients achieve their financial goals. We offer a range of planning services that can help you plan for retirement and potentially save on your 2021 taxes, including:

  • Investment planning: One of our financial advisors can work with you to analyze how well your investments performed and recommend potential modifications better suited to your goals or identify tax-reducing strategies.
  • Retirement planning: Many Americans' retirement planning stops and starts with their contributions to a workplace 401k plan. Many of the best financial advisors recommend greater diversity in retirement planning, including a mix of traditional and Roth savings plans to balance better the tax savings you enjoy today with your cash flow needs in retirement.
  • College savings and gift planning: Working with one of our financial planners, you can devise college savings and gifting strategies to save for your children's or grandchildren's education or make charitable donations or gifts to family without incurring tax penalties.


Filing your taxes is no walk in the park. The IRS estimates the average taxpayer spends 13 hours preparing their return. In 2019 alone, the IRS processed more than 250 million tax returns and fielded questions from 61 million taxpayers by phone and in-person. When you are trying to coordinate your retirement planning strategy with your tax planning, it becomes even more confusing.

Since 1988, families in Flagstaff have partnered with Benefit & Financial Strategies to build a stable vision for their financial future. Whether you're a parent, grandparent, small business owner, or just getting started in the workforce after college, it's always essential to get expert advice so you can be sure you're making the best financial investments for your current and future goals. To learn more about how we can help you achieve your goals and gain financial independence, contact us today.

We look forward to working with you.