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Retirement

Life Events That Can Affect Your Tax Return

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  Life has a way of changing faster than our paperwork — and that includes your taxes. Major milestones like marriage, having a child, buying a home, or even relocating can have significant effects on your tax situation. The good news is that with a little awareness, you can prepare ahead and avoid missing valuable tax opportunities.
Marriage is one of the most impactful life changes for your taxes. Once you tie the knot, you can choose to file jointly or separately. For most couples, filing jointly offers better tax brackets and access to credits like the Earned Income Tax Credit (EITC) and Child Tax Credit. However, in certain situations — for example, if one spouse has high medical expenses or significant student loans — filing separately may make sense.

Having a child opens the door to several tax benefits. You may qualify for the Child Tax Credit, Dependent Care Credit, and deductions for education savings contributions. Be sure to update your W-4 form with your employer so the correct amount of tax is withheld from your paycheck — too much, and you’re giving the IRS an interest-free loan; too little, and you risk a surprise bill in April.

Buying a home can also shift your tax picture. Homeowners may be able to deduct mortgage interest, property taxes, and even mortgage insurance premiums. Energy-efficient upgrades can qualify for tax credits, while certain home office expenses can be deducted if part of your home is used exclusively for business.

Relocating to a new state can change your income tax rate or filing requirements. States have varying rules on deductions and credits, so consult with your accountant to ensure compliance and optimize for your new location.

Even less obvious events — like starting a business, inheriting property, or retiring — can create new tax obligations or opportunities. Keeping your accountant informed whenever a major change occurs helps them adjust your strategy and ensure you’re making the most of available credits and deductions.

In short, life events can significantly alter your tax outcome, but they don’t have to catch you off guard. With timely updates, good recordkeeping, and proactive planning, you can make sure your tax situation evolves alongside your life — not after it.

How Inflation Continues to Impact Investment Strategies

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IBusiness people working on business contract papers at officenflation remains one of the most influential forces shaping investment strategies. Even when inflation appears to stabilize, its long-term effects continue to influence purchasing power, returns, and portfolio construction. For investors in 2026, understanding how inflation interacts with different asset classes is essential for protecting wealth and maintaining real growth over time.

Inflation reduces the real value of money, meaning that investments must earn more than the inflation rate just to preserve purchasing power. Traditional savings vehicles, while stable, may struggle to keep pace during prolonged inflationary periods. This has pushed many investors to reevaluate how their portfolios are structured and whether they are positioned to withstand rising costs.

Certain asset classes tend to respond differently to inflation. Equities, for example, can offer long-term growth potential, particularly when companies are able to pass higher costs on to consumers. Real assets, such as real estate or commodities, may also provide a hedge because their values and income streams can adjust with inflation. Fixed-income investments, however, can be more sensitive, as rising inflation often leads to higher interest rates, which can reduce bond values.

Inflation also affects investment time horizons. Short-term volatility may increase during inflationary periods, making it more important for investors to focus on long-term objectives rather than reacting to temporary market fluctuations. Adjustments may include reviewing asset allocation, rebalancing portfolios more frequently, or incorporating investments designed to provide inflation protection.

Tax considerations further complicate inflation planning. As nominal returns rise, investors may face higher tax liabilities even when real returns remain modest. Coordinating investment strategies with tax planning can help improve after-tax outcomes.

Inflation is not a short-term concern; it is an ongoing factor that requires continuous monitoring. Investors who acknowledge its impact and adapt their strategies accordingly are better positioned to preserve purchasing power and sustain growth in changing economic conditions.

Timing Income and Deductions for Better Tax Outcomes

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Sorenson & Company, CPA

Effective tax planning is not just about what you earn or spend, but when those transactions occur. Timing income and deductions strategically throughout the year can significantly impact your overall tax outcome. This approach becomes especially important for individuals and business owners with variable income or flexible payment schedules.

Income timing involves deciding when to recognize income for tax purposes. In some cases, deferring income into a future tax year may reduce tax liability, particularly if you expect to be in a lower tax bracket later. Conversely, accelerating income into the current year can be beneficial if tax rates are expected to rise or if current deductions are unusually high.

Deduction timing works in a similar way. Paying certain expenses before year-end can increase deductions in the current tax year, while postponing them may be more advantageous if income will be higher in the future. Strategic planning allows taxpayers to align deductions with higher-income periods, maximizing their impact.

Examples of timing strategies include:

  • Accelerating or delaying bonus payments, invoices, or project billing
  • Prepaying deductible expenses such as rent, insurance, or professional fees
  • Scheduling equipment purchases or capital improvements strategically
  • Managing retirement contributions to optimize deductions
  • Planning charitable contributions to align with higher-income years

For business owners, timing decisions can influence cash flow as well as taxes. For example, a business with a strong year-end may choose to purchase necessary equipment before December 31 to take advantage of deductions, while still preserving liquidity for the new year.

Timing strategies must always align with tax rules and accounting methods. Cash-basis taxpayers generally recognize income when received and deductions when paid, while accrual-basis taxpayers follow different rules. Understanding which method applies is critical before implementing any timing adjustments.

It is also important to consider how timing decisions interact with estimated tax payments and potential penalties. Deferring income without adjusting estimated payments may create underpayment issues if not planned carefully.

Tax timing is most effective when approached as a year-round process rather than a last-minute decision. Regular reviews throughout the year allow for adjustments based on changing income, expenses, and personal circumstances.

By thoughtfully managing when income is earned and deductions are taken, taxpayers can create more predictable outcomes and reduce unnecessary tax exposure. Strategic timing does not eliminate tax obligations, but it can significantly improve efficiency and financial clarity.

Record Retention — The “Paper” Trail

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As plan sponsors are well aware, the pension law (ERISA) includes specific reporting and disclosure obligations with respect to qualified retirement plans. A lesser known fact is that ERISA also has specific requirements regarding the retention of plan records. Below we answer questions you and other plan sponsors may have about retaining records and the importance of a record retention policy.

Why would we need a record retention policy? A retirement plan, by its very nature, generates a large amount of documentation. Some records should be retained indefinitely. Others may be disposed of in time. Having an established document retention system that allows plan records to be reviewed, updated, and preserved or disposed of in an organized fashion fosters good administration and helps the plan comply with pension law. Such a system can also make required documents readily accessible for IRS review, if requested.

Who is responsible for retaining plan records? Under ERISA, the plan administrator — which is often the plan sponsor — is ultimately responsible for maintaining the plan’s records.

What records do we need to keep? The list is long. First, you need to keep all records that support the information included in your plan’s Form 5500 filings and other reports and disclosures. These supporting documents essentially include whatever records a government auditor might need to verify the accuracy of the original report or disclosure. You also need to keep records used to determine eligibility for plan participation and any plan benefits to which employees and beneficiaries may be entitled. Records include:

  • The original signed and dated plan document, plus all original signed and dated plan amendments
  • Employee communications including summary plan descriptions (SPDs), summaries of material modifications (SMMs), and anything else describing the plan that you provide to plan participants
  • The determination, advisory, or opinion letter for the plan
  • All financial reports
  • Copies of Form 5500
  • Payroll records used to determine eligibility and contributions, including details supporting any exclusions from participation
  • Evidence of the plan’s fidelity bond
  • Documentation supporting the trust’s ownership of the plan’s assets
  • Documents relating to plan loans, withdrawals, and distributions
  • Nondiscrimination and coverage test results
  • Employee personal information, such as name, Social Security number, date of birth, and marital/family status
  • Employment history, including hire, termination, and rehire dates (as applicable) and termination details
  • Officer and ownership history and familial relationships
  • Election forms for deferral amount, investment direction, beneficiary designation, and distribution request
  • Transactional history of contributions and distributions

How long do we need to keep the records? Generally, you should keep records used for IRS and DOL filings for at least six years after the filing date. Retain records relevant to the determination of benefit entitlement indefinitely (basically, permanently).

Plan to Work Past Retirement Age?

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Happy old elderly senior grandparents family couple clients signs financial insurance, pension, startup, dealing handshake agent lawyer, agreement with customers on investment contract, bank managerOf the more than thirty-four million Americans age 55 and older who were employed in 2020, over nine million were individuals age 65 and older.* People continue working past the traditional retirement age for a variety of reasons. Some actually enjoy what they do for a living. Their work gives meaning to their lives and helps fill their days, and they appreciate the company of coworkers. Others have to work since they cannot afford to retire. And there are other people who choose to continue working because of employer-provided benefits or because they want extra time to build up their retirement savings.

The Financial Benefits of Working Longer

Staying longer in the workforce can yield several significant financial benefits:

  • Regular paychecks
  • Potential for overtime and bonuses
  • Ongoing contributions to a retirement plan
  • Continued access to employer-provided benefits, such as health care coverage
  • Additional payments into the Social Security system that could boost the amount of final Social Security retirement payments


Potential Roadblocks to Working Longer

There’s no guarantee that someone who wants to stay in the workforce will be able to continue working. A person’s plans could be sidelined by:

  • An illness or disability
  • The need to care for a spouse or other family member
  • A downturn in the economy and the job market
  • A mismatch of skills and available job openings

Preparing for All Eventualities

Too many people reach retirement age, find that they can’t afford retirement, and discover that there are limited opportunities for finding post-retirement-age work. You can avoid this scenario by using your earning years to set aside money for your retirement. Irrespective of how much you earn, you should focus on making regular contributions to your employer-provided retirement plan or to an individual retirement account.

The reality is that you may need an annual income in retirement that is not all that different from your current income — especially if you anticipate an active retirement that involves frequent travel or expensive hobbies. When evaluating your potential retirement income needs, you will need to consider these factors:

  • Your retirement may last well into your 90s.
  • Inflation will likely occur.
  • Health care costs could increase as you age.
  • Payments from Social Security will only cover the basic necessities of life.

Talk With a Financial Professional

Your financial professional will examine your contribution levels and your investments to see if there are any weaknesses in your current strategies. You may need to boost your retirement plan contribution percentages and reevaluate your current investment selections and asset allocation** in order to afford the type of retirement you want.