Retirement Tax Planning Mistake: A Hidden $10,000 Missed-Deduction Surprise
By Graham Ewing, CFP®, MBA, Director of Financial Planning Standards
A couple came to our office not long ago with a straightforward goal: make sure they were ready to retire. The husband was considering retiring soon, the wife planned to work a few more years, and they wanted a comprehensive review of their finances before making the transition.
They weren’t expecting what we’d find: over $10,000 in refunds waiting in their old returns.
The Discovery Nobody Saw Coming
When new clients come to us, we put them through what we call a Financial Physical®. It’s a comprehensive review that covers investments, insurance, estate planning, and taxes. We ask for three years of tax returns, and we actually read them, line by line.
This couple had done everything right. They had saved diligently, had two military pensions, a federal (FERS) pension, and had worked with a CPA for years.
But when we got to their Maryland state return, something stood out immediately: there was no military pension deduction.
Maryland offers a deduction for residents age 55 or older who receive military retirement income. At the time, it was $15,000 per person. Both members of this couple had military pensions, which meant they should have been claiming $30,000 in deductions every year.
They weren’t.
Three Years of Missed Opportunities
They amended their 2021, 2022, and 2023 returns. For each year, we recovered roughly $3,000 in actual tax savings. And because we caught the issue before their 2024 return was filed, we made sure that one was done correctly too.
The law has since changed; Maryland now allows a $20,000 deduction per person for military retirement income. Since both spouses had military pensions, that is a $40,000 deduction their previous preparer would have continued to miss.
The total amount recovered was almost $10,000 in refunds, plus ongoing savings every year going forward.
Their reaction was exactly what you would expect: “How did this happen?”
Why These Mistakes Slip Through the Cracks
Tax preparation and financial planning usually live in separate silos. Most CPAs operate on a transactional basis; you send documents, they prepare the return, you sign it, and the relationship ends there until next year. Although there is nothing wrong with that model and it works fine for straightforward situations, it doesn’t account for the things you don’t know to tell them.
This couple didn’t walk in and say, “Don’t forget our military pension deduction.” They assumed their CPA knew, their CPA assumed the software would catch it, and nobody was having a real conversation about their full financial picture.
That is the gap integrated tax planning fills.
What “Integrated” Actually Means
When we say we handle financial planning and tax preparation under one roof, we mean it literally. Nearly half of our advisors are CPAs, and we have a dedicated four-person tax team. Your wealth advisor and your tax preparer aren’t just in the same firm, they’re collaborating on the tax return together.
Rather than plugging numbers into software and handing over a return for signature, we offer a sit down with clients and walk through everything together. We show them where their financial decisions appear on the actual return.
That Roth conversion we discussed in March? Here is where it shows up. The qualified charitable distribution from your IRA? This is how it affected your taxable income.
This collaborative approach uncovers things that would otherwise slip by:
“You contributed to a 529 plan for your grandkids? Let me verify that deduction made it onto the return.” (It often doesn’t because there is no clean tax document for 529 contributions.)
“You’re retiring next year? Then these estimated tax payments the software calculated are going to be significantly off, so let’s address that now.”
This couple told us it was a completely different experience from what they had before. Their previous preparer would hand over the return and say, “Sign here.” There was no conversation about what the numbers meant or how to plan for the year ahead.
Our advisors are educators at heart. We want clients to understand their finances, not just trust that someone else has it handled. That understanding builds confidence. and it often surfaces information we wouldn’t have known to ask about.
The Real Value of Getting It Right
After we found those missed deductions, this couple decided they wanted us to handle both their wealth management and tax preparation going forward.
Their previous CPA was competent; the difference was that we had visibility into their complete financial situation.
When you’re approaching retirement, your financial life becomes more complicated, not less. You’ve got pension income, Social Security timing decisions, required minimum distributions, potential Roth conversions, and healthcare costs before Medicare kicks in. Each of those decisions affects your taxes, and your tax situation affects each of those decisions.
Ready for Your Own Financial Physical®?
If you’re approaching retirement and wondering whether your financial plan and tax strategy are working together, we would welcome the chance to talk. Our Financial Physical® process examines your investments, insurance, estate plan, and three years of tax returns to identify opportunities others may have missed.
Schedule a complimentary introductory call to learn how Financial Consulate’s integrated approach to financial planning and tax preparation could work for you.
Frequently Asked Questions About Retirement Tax Planning
Why would a CPA miss a deduction on my tax return?
Most CPAs rely on the documents you provide and the information their software prompts them to request. Deductions like state-specific military pension exclusions, 529 plan contributions, or qualified charitable distributions don’t always generate clear tax documents. If a client doesn’t know to mention something and the preparer doesn’t know to ask, it simply doesn’t make it onto the return. This is especially common when a CPA doesn’t have visibility into your broader financial situation.
What is the benefit of having my financial advisor and tax preparer at the same firm?
When your financial advisor and tax preparer work together, they can connect the dots between your financial decisions and your tax return. Your advisor knows you’re retiring next year, so they can flag that your estimated tax payments need to change. They know you made a charitable gift from your IRA, so they can verify it was recorded correctly. This coordination prevents the kind of oversights that happen when two professionals are working from incomplete information.
How do I know if there are mistakes on my past tax returns?
The most reliable way is to have a qualified professional review your returns alongside your full financial picture. Look for a firm that examines multiple years of returns and understands your income sources, deductions you may qualify for based on your state, and any recent life changes like retirement or Social Security. If your current preparer has never asked about these details, there may be opportunities worth investigating.
What is the Maryland military pension deduction and who qualifies?
Maryland allows eligible military retirees (and certain surviving spouses) to subtract a portion of military retirement income from Maryland taxable income. In general, the subtraction is up to $20,000 if you’re age 55+ by the end of the tax year, or up to $12,500 if you’re under 55. Eligibility depends on the type of military retirement income and your situation, so it is worth confirming with the current Maryland guidance when you file.
How far back can you amend a state tax return?
For Maryland, you generally have three years to file an amended return (Form 502X) from the date the original return was due (including extensions) or filed. If you miss that window but file within two years of when the tax was paid, your refund may be limited to what you paid during the two years immediately before you file the claim. Certain scenarios can have different timing rules, so it’s smart to check the amended-return instructions for your specific situation.
About Graham
Graham Ewing, CFP®, is a Wealth Advisor and Director of Financial Planning Standards at The Financial Consulate. He works with clients to navigate the financial side of major life transitions, focusing on tax planning, estate planning, investment planning, and retirement planning. His approach emphasizes clarity, structure, and thoughtful guidance during periods that are often both complex and emotional. In addition to his work with clients, Graham helps lead the firm’s financial planning department by supporting newer advisors and continually improving planning processes to strengthen the client experience.
Graham earned his bachelor’s degree in business administration with a concentration in finance and a minor in economics from Towson University. He became a CERTIFIED FINANCIAL PLANNER® professional in 2015 and later earned an MBA with an emphasis in Financial Planning from California Lutheran University. Outside of work, Graham enjoys spending time with his family and traveling. He has visited more than a dozen countries and 41 U.S. states and looks forward to sharing that love of travel with his wife and two children. To learn more about Graham, connect with him on LinkedIn.