Behind on Bookkeeping? How to Catch Up Before Tax Time

Falling behind on bookkeeping is extremely common, especially in your first year. The longer it waits, the harder it gets, but a clear plan makes catching up manageable.

Signs you need catch-up bookkeeping

• You haven't categorized transactions in months
• Your accounts haven't been reconciled
• Tax season is approaching and you don't know your profit
• You received a notice about missing filings
• You need financial statements for a loan and don't have them

Step 1: Gather your documents

Collect for the entire period you're behind:

• Bank and credit card statements (download PDFs from online banking)
• Payment app and processor reports (PayPal, Square, Stripe, Venmo)
• Sales records and invoices
• Receipts for significant expenses
• Loan statements
• Payroll reports
• Prior tax returns and any notices you've received

Step 2: Start from the last good point

Find the last month that was accurately reconciled, or the business start date if nothing was ever done. Confirm opening balances match your statements.

Step 3: Work in order, month by month

1. Import or enter all transactions
2. Categorize income and expenses
3. Separate personal transactions (owner draws and contributions)
4. Reconcile each account to its statement before moving to the next month

Working month by month keeps errors from compounding.

Step 4: Handle the tricky items

• Transfers between your own accounts (don't count them as income or expense)
• Loan payments (split into principal and interest; only interest is an expense)
• Equipment purchases (record as assets, not regular expenses)
• Sales tax collected (a liability, not income)
• Missing receipts (use statements and notes; recreate what you reasonably can)

Step 5: Review the results

Run a profit and loss and balance sheet for each year. Do the numbers make sense? Compare revenue with your Washington excise tax returns and any 1099s or 1099-Ks you received.

Step 6: Catch up on filings

Once books are accurate, you can file missed tax returns, excise returns and information returns. Address the most penalty-heavy filings first.

DIY or hire help?

Doing it yourself may work for a few months of simple activity. For a year or more, multiple accounts, payroll or sales tax, a professional usually finishes faster, more accurately and often for less than the cost of missed deductions and penalties.

Step 7: Stay current going forward

• Schedule monthly bookkeeping time, or hire monthly bookkeeping
• Connect bank feeds and receipt capture
• Reconcile every month

The bottom line

Being behind is fixable. Gather statements, work month by month, reconcile as you go and set up a monthly routine so you never have to catch up again.

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Need help getting this right? TRIG Bookkeeping & Tax Services helps new business owners in Washington with company registration, monthly and annual bookkeeping, and government compliance. Contact us to talk about your business.

This article is general information, not legal or tax advice for your situation. Tax rules and fees change, so confirm current details with the IRS, the Washington Department of Revenue, or a qualified professional.