There's an old episode of The Simpsons where Homer realizes, on the night of April 15, that he has to file his taxes. Every year. He races to the post office, invents deductions out of thin air, and is shocked by what he owes.
His neighbor, Ned Flanders, filed weeks ago. Of course he did.
I brought up that episode on ABC7's Good Morning Washington this spring, during Financial Literacy Month, because almost everyone has a little Homer in them when it comes to taxes. We treat the return as a chore to get through, file it, and forget it until next April. But your tax return is one of the most useful financial documents you own. Read it the right way and it works like an X-ray. It lets you look under the skin and see what your money is actually doing.
Here's the segment if you'd like to watch it first. Then I'll walk you through the longer version I didn't have time for on live TV.
What the X-ray shows
When I sit down with a new client, one of the first things I ask for is the last two years of tax returns. Not because I'm a tax preparer, but because the return tells me things nobody remembers to mention.
Where your income really comes from. Wages, interest, dividends, capital gains, IRA withdrawals, Social Security. The mix matters, because each one is taxed differently, and in retirement you get to choose much of that mix yourself.
What your investments are costing you in taxes. This is where people get the biggest surprise. If you own mutual funds in a regular taxable brokerage account, those funds can pay out capital gains every year, even in a year you didn't sell a thing. You still owe tax on them, even if they were reinvested. Many people pay that tax for years without ever noticing it on the return.
Your bracket, and how close you are to the next one. Your marginal bracket tells you what the next dollar of income will cost. Knowing it helps you decide whether this is a good year to take more income, or a good year to hold back.
What retirement will look like from a tax standpoint. If almost everything you've saved is in pre-tax accounts like a 401(k), 403(b), or TSP, the return shows you a preview of the future. Every dollar you take out of those accounts later shows up right here as income.
Taxable investments are where the surprises live
On the show, I singled out two groups who tend to get caught off guard at tax time: business owners and people with taxable investments. For the families I work with, it's usually the second one.
The fix is what I call tax-informed investing. It's not about chasing the lowest tax bill at all costs. It's about making sure the tax tail is considered, without letting it wag the dog. A few of the tools:
- Putting the right investments in the right accounts. Some investments are more tax-efficient than others. Where you hold them can matter as much as what you hold.
- Choosing tax-efficient funds in taxable accounts, so you aren't handed a capital gains bill every December for a sale you never made.
- Harvesting losses when markets drop, to offset gains elsewhere.
It's not just how much you make. It's how much you keep.
A plan before a move
The host asked me a second question that morning: with markets as volatile as they've been, when should someone revisit their investment strategy?
My answer was that the strategy should come before the volatility, not after it. A good plan is built to ride through the social, political, and economic uncertainty that's simply part of life. If you find yourself making big investment moves every time the headlines turn ugly, that's usually a sign there wasn't a plan to begin with.
Fidelity has run a study on this for years. In one version, a hypothetical $10,000 invested in the S&P 500 at the start of 1980 grew to about $1.26 million by the end of 2022 if it was simply left alone. Miss just the five best trading days in those 42 years, and it grew to about $782,000 instead. The best days often come right after the worst ones, which is exactly when the Homers of the world have already bailed out.
Your Ned Flanders checklist
Ned doesn't have a secret. He just does a few things before he has to. Here's where I'd start this month:
- Pull out last year's return and look at the income lines, not just the refund or the balance due. Where did the income come from?
- Check your taxable accounts for capital gain distributions you didn't expect. If they show up every year, it's worth a conversation about how those accounts are invested.
- Look two years ahead. If you're within a few years of retirement, the income on your return two years before Medicare will help set your Medicare premiums. I wrote about that in The Bridge to Medicare.
Be proactive, not reactive. Be Ned, not Homer.
If you'd like a second set of eyes on what your tax return is telling you, and what it means for your retirement, let's look at it together. Start with a 30-minute Exploratory Call.
Keep reading:What Yellowstone's Wolves Can Teach You About Balance in Retirement and Your Will Doesn't Control Your 401(k).
This article is for general education and is not individual tax, legal, or investment advice. Talk with your CPA about your own return. The Fidelity example is hypothetical, is based on the S&P 500 index from January 1, 1980 through December 31, 2022, and does not reflect fees, taxes, or any actual investment. It is not possible to invest directly in an index, and past performance does not guarantee future results. The ABC7 WJLA segment was sponsored by CFP Board.
Sources: ABC7 WJLA Good Morning Washington, April 8, 2026; Fidelity Investments, "Don't miss the best days" analysis.