It’s February, and that means it’s tax season here at Bluestem. For clients, it’s time to start getting organized. Begin by gathering all necessary documents, including W-2s, 1099s, receipts for deductible expenses, and records of any other income or expenses relevant to tax preparation like childcare expenses. Take advantage of Bluestem’s checklist and Tax Summary Worksheet, to track what you've collected and what's still needed. This preparation can streamline the process for both parties and help avoid errors. For items such as medical expenses, where the transactions are numerous, it’s best to log the individual transactions in a summary document contemporaneously with the amount, date, and description, then file the receipts away.
The graphic below offers a helpful illustration of what the tax prep process looks like:
Proper document retention is equally important. We recommend you keep records that support income, deductions, and credits for six years. Going back to the medical expense example, those receipts you filed away would be saved, and hopefully unused, for that six-year period. This record-keeping ensures you're prepared for any inquiries or audits from tax authorities.