Enough time has passed that most of us have recovered from the mind-numbing task of filling out and filing our federal income tax returns.
Now I'm going to commit what seems like the ultimate act of mental cruelty by asking you to dig out the return you filed and take another look.
But I want you to look at your return in a more cheerful light - not as a dreaded government-imposed chore but as a personal road map to achieve your dreams.
Reviewing your finances once a year is a useful exercise that financial advisers often recommend. Many people do it at the beginning of the year or around their birthday. I prefer to do it at tax-filing time because much of the information I need is right there on the tax return.
Most Americans look at tax preparation as an isolated task, separate from the financial planning process, according to a recent study by the Hartford Financial Services Group. Among 1,103 taxpayers surveyed, two-thirds didn't know the tax forms could provide a record of their savings strategies.
"In reality, similar to the way a medical chart helps us diagnose our physical health, our 1040 tax form can provide clues on where we are financially, and where we might go in the future," said John Diehl, a certified financial planner with The Hartford.
For example, Line 32 of the 1040 form inquires about deductions for individual retirement accounts. We should be contributing as much as possible to tax-deferred retirement vehicles such as IRAs and 401(k) and 403(b) plans, Diehl said.
If you are retired, Lines 15, 16 and 20 will show any income received from IRAs, pensions and annuities and Social Security benefits. Analyzing the numbers with the help of a professional, if needed, will help you determine whether you are taking income the most tax-efficient way.
Still working and raising a family? Line 6c asks you about children and dependents. If you have a bunch, you can claim more exemptions and credits. But a high number also means college costs can sneak up on you, Diehl said, and you should consider tax-advantaged college savings vehicles such as 529 plans or Coverdell savings accounts.
In fact, just about every line on the 1040 form can help you pinpoint areas to examine and sharpen your financial plan, Diehl said. Here are a few my wife and I regularly look at:
Line 12, business income (or loss).
As self-employed writers, this is where we report our net income from work. (If you work for an employer, you would look at Line 7 for your wages, salaries and tips.) Even if it means paying more taxes, we want the number to grow during our working years. We managed a small increase last year, even as we cut back a bit on our writing, thanks to more publications running our stories and columns.
Line 13, capital gain or loss.
The main point here is not so much whether our investments went up or down last year (happily, they did go up on average). The point is that Line 13 was sufficient to report our capital gains because all of them came from mutual fund distributions and not from any direct sale of securities, which would have required us to fill out a separate Schedule D form. Not having to mess with Schedule D is just reward for our strategy of holding high-quality investments for the long-term rather than constantly switching and chasing after the latest "hot" stock or fund.
Line 28, for self-employed qualified plans.
Our entry reminds us we were able to cut our taxes substantially by contributing - and thus deducting from our taxable income - more than half our combined work income to our self-employed 401(k) plans. If you work for somebody else, you can cut your taxes and taxable income by contributing to a regular 401(k) or similar plan.
Humberto Cruz writes for Tribune Media Services.