How to Read Your Tax Return & Why Filing an Extension Isn’t a Bad Thing

For many people, reading a tax return can feel like trying to decode a secret message. The good news? You don’t need to understand every line. Focusing on a few key sections can help you feel more confident about your finances.

Form 1040 is the main document in your tax return — think of this as your financial snapshot. It summarizes your income, deductions, total tax, and payments made throughout the year.

To better understand your financial picture, we recommend reviewing these core figures on your 1040:

• Total Income (Line 9) – All income sources combined
• Adjusted Gross Income, or AGI (Line 11) – A key “planning number” used to determine eligibility for deductions, credits, and various thresholds (for example, Roth IRA contributions or Medicare premiums)
• Taxable Income (Line 15) – The portion of your income actually subject to tax
• Total Tax (Line 24) – Your overall tax liability (before considering payments made)
• Total Payments (Line 33) – Includes withholdings, estimated payments, and credits
• Refund (Line 34) or Amount Owed (Line 37) – The final result

Other Important Documents to Review

Don’t worry, the fun doesn’t stop after reviewing your 1040. You may or may not have additional important documents to review, including:

• Schedule 1 – Additional income and adjustments (e.g., business income, deductions like HSA contributions)
• Schedule D – Capital gains and losses from investments
• Schedule A – Itemized deductions (if applicable)
• Schedule E – Income from rentals, partnerships, S-corporations, or trusts
• Form 8606 – Tracks IRA basis and Roth conversion activity (critical for avoiding double taxation)
• 1099 forms (INT, DIV, R, etc.) – Detail income from interest, dividends, and retirement accounts

What We Look For When We Review Your Return

When we review your tax return, we’re not just looking at what happened during the calendar year. We’re also looking for opportunities to improve your plan and ensure everything was reported correctly.

Some of the questions we ask include:

• Was any rollover reported correctly?
• Were charitable contributions reported properly?
• Was your income higher or lower than expected? Why?
• Are there capital gains or losses? Is there an opportunity for tax-loss harvesting or gain harvesting? Was cost basis reported correctly?
• Was IRA basis or Roth conversion basis properly tracked?
• Were required minimum distributions (RMDs) taken and reported correctly?
• Were any credits missed or underutilized?
• Are there any inconsistencies or red flags across forms?

By reviewing these items, we can determine whether adjustments may be needed. This can include updating withholdings, exploring Roth conversion opportunities, or planning ahead for Medicare-related surcharges like IRMAA (Income-Related Monthly Adjustment Amount).

Why Filing an Extension Isn’t a Bad Thing

If you haven’t filed your taxes just yet, there’s no need to panic. You still have time before the filing deadline. If you are waiting on a delayed document (K-1’s are a common example), your CPA may recommend filing an extension. While extensions sometimes get a bad reputation, they simply provide more time to file. It’s important to note that filing an extension does not extend the deadline to pay taxes owed. If you expect to owe, your CPA may recommend submitting a payment along with your extension to avoid penalties.

In many cases, extensions are beneficial because they allow for a more thoughtful, accurate review of your return instead of rushing to meet the April deadline.

Feeling Overwhelmed?

If the idea of reviewing your tax return feels overwhelming, start small. Take a few minutes to look at your 1040 and focus on the key figures listed above.

If your income and situation haven’t changed much from last year, those numbers should look relatively similar. If they don’t, it may be worth taking a closer look.

Still unsure what you’re looking at, or simply don’t want to spend time deciphering your return? That’s exactly what your dedicated Oasis team is here for.