Quick answer

Nothing happens the day the bookkeeping slips — but the filing deadlines built on it keep running. GST/HST returns, payroll remittances and a corporation’s annual return all come due whether or not the books are ready, and CRA can charge penalties and interest when they are late.12 The way back is to find where the books stop, then work forward month by month from the bank and card statements.

Why do the books fall behind?

Usually for good reasons. The business got busy, the person doing the books left, a software change stalled, or a hard month turned into a hard year. Bookkeeping is the first thing that gets pushed aside, because nothing breaks right away.

The trouble is that the work does not shrink while it waits. Every month adds another set of statements to reconcile, and receipts get harder to find the older they are.

Which deadlines keep running?

Obligations that do not wait for the books
ObligationThe rule
GST/HST returnsA registrant files a return for every reporting period, even with no net tax to remit.3
Payroll source deductionsEmployers deduct CPP contributions, EI premiums and income tax from pay,4 and CRA may charge interest from the day an unpaid amount was due.5
Corporate tax return (T2)Resident corporations generally file a T2 for every tax year, even with no tax payable,6 within six months of the end of the tax year.7

What does falling behind actually cost?

  • Penalties on late returns. CRA applies a penalty when a corporation files its return late,2 and a GST/HST return filed after its due date may be charged a late-filing penalty if you owe money.1
  • Interest that compounds. CRA compounds arrears interest daily on an unpaid corporate balance,8 and charges interest on unpaid GST/HST at a prescribed rate, also compounded daily.9
  • Input tax credits you can no longer claim. CRA sets a time limit on claiming an ITC — generally four years, and two for some larger businesses and financial institutions.10 Older credits can run out while the receipts sit in a drawer.
  • Decisions made blind. Without current books you are guessing at cash, margins and what is owed to you.
  • A harder conversation with a lender. A bank asking for recent financial statements needs books that are up to date.

How long do you have to keep the records?

Generally six years from the end of the last tax year the records relate to,11 and CRA expects you to make them available when it asks for them.12 That matters for catch-up in two ways: the statements and receipts for the years you are behind should still exist, and they are what the catch-up is built from.

What if CRA contacts you before you have caught up?

Read the letter carefully and respond by its deadline; a notice does not go away on its own. If someone is helping with the books, CRA lets you authorize them as your representative so they can deal with CRA directly.13

You may also come across CRA’s Voluntary Disclosures Program, which grants relief case by case to people who come forward to fix errors or omissions in their tax filings.14 It has conditions — CRA lists who is eligible, including applying before an audit or investigation starts.15

How do you catch up on overdue bookkeeping?

Catch-up is methodical rather than mysterious. The order matters, because each step relies on the one before it:

  1. Find where the books stop. Look for the last month that was reconciled to the bank statement, and the last point the books were known to be right — often a year end that went into a tax return. That is the starting line.
  2. List what has been filed. Note which GST/HST returns, payroll remittances and tax returns went in and which did not. CRA shows previously filed, upcoming and overdue GST/HST returns in your CRA account.16
  3. Gather the statements. Every bank account, credit card, line of credit and loan — and any payment processor, such as Square, Stripe or PayPal — for every month that is behind. Ask the bank for any statement you cannot download.
  4. Work forward from the starting line, one month at a time. Reconcile each account to its statement before moving on, so every month opens from a balance that is known to be right.
  5. Record, categorize and match receipts. Transactions are recorded from the statements, receipts and invoices are matched where they exist, and the missing ones go on a list.
  6. Separate personal from business. Personal spending that went through a business account is recorded as the owner’s, not as a business expense.
  7. Bring payroll and GST/HST into line. Check remittances against pay records, and compare the GST/HST in the books with what was reported. A registrant files a return for every reporting period, so a period with no return is part of the job.3
  8. Close each year, then stay current. A finished year is ready for its tax return, and a monthly routine after the last one keeps it from happening again.

Working a year at a time keeps the job manageable, and each finished year is useful on its own — its tax return can be prepared while the next year is still being done.

What makes a catch-up harder than it needs to be?

  • Starting with this month. It feels most urgent, but it rests on opening balances nobody has checked yet, and every fix to an earlier month moves them again.
  • Categorizing without reconciling. Neatly labelled transactions can still be missing, doubled or in the wrong account until they are matched to a statement.
  • Working from memory. Statements show what actually happened; a guess has to be found and undone later.
  • Quietly changing a period that was already filed. If a filed period turns out to be wrong, note what changed and why, so whoever prepares or corrects the return can see it.
  • Throwing out old paperwork. CRA generally expects records to be kept for six years,11 and the catch-up is built from them.

What does catch-up cost, and how long does it take?

It depends on how far behind the books are, how many accounts there are, how much activity went through them and how complete the receipts are. A few quiet months is a short job; several busy years with missing statements is a long one.

A few months of a simple business, with the receipts in hand, is realistic to catch up yourself. Several years, payroll, unfiled GST/HST periods or a tax notice are good reasons to hand it off.

We price catch-up per year of books and tell you the price before we start — what is missing, what needs fixing and what it will cost. After that, monthly bookkeeping starts from $199 a month. See how it works on the Halifax or St. John’s page.

Frequently asked questions

I haven’t done my books in over a year. Is it too late?

No. It is more work than staying current, but it is ordinary work. It starts with the bank and card statements for the months you are behind, and goes one period at a time.

Where should I start catching up?

At the last point the books were known to be right — often the last year end that went into a tax return — and work forward from there, one month at a time.

Do I have to file a GST/HST return if I had no sales?

If you are registered, yes. CRA requires a return for every reporting period even when there is no net tax to remit — a nil return.3

What if I’ve lost receipts?

Catch-up starts from the bank and card statements, which show every transaction. Missing receipts are identified as the work goes, so you know what is missing and can look for copies from suppliers.

Can you catch up the books and then keep them current?

Yes. That is the usual order: catch up first, then a regular monthly process. See what a bookkeeper costs.

Sources

  1. GST/HST filing penalties, Canada Revenue Agency. Accessed .
  2. Avoiding penalties, Canada Revenue Agency. Accessed .
  3. Reporting requirements and deadlines – File your GST/HST return, Canada Revenue Agency. Accessed .
  4. Get ready to make deductions, Canada Revenue Agency. Accessed .
  5. When to remit (pay), Canada Revenue Agency. Accessed .
  6. Find out if you have to file a corporation income tax return (T2), Canada Revenue Agency. Accessed .
  7. When to file your corporation income tax return, Canada Revenue Agency. Accessed .
  8. Understanding interest, Canada Revenue Agency. Accessed .
  9. Remit (pay) the GST/HST you collected, Canada Revenue Agency. Accessed .
  10. Input tax credits, Canada Revenue Agency. Accessed .
  11. Where to keep your records, for how long and how to request the permission to destroy them early, Canada Revenue Agency. Accessed .
  12. Your responsibilities and the requirements associated with records the law requires you to keep, Canada Revenue Agency. Accessed .
  13. Authorize a representative: Overview, Canada Revenue Agency. Accessed .
  14. Voluntary Disclosures Program (VDP), Canada Revenue Agency. Accessed .
  15. Voluntary Disclosures Program: Who is eligible, Canada Revenue Agency. Accessed .
  16. After you file – File your GST/HST return, Canada Revenue Agency. Accessed .

This article is general information about how things usually work in Canada, current as of the date it was last updated. It isn’t advice about your own tax or accounting position, which depends on facts we haven’t seen.

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