What to Do If You’re Over a Year Behind in Your Bookkeeping (and Therefore, Your Taxes)

A Simple Guide with Tangible Steps (and a Little Humour to Keep You Sane)

So, you’re a year behind on your bookkeeping. Maybe even two. And taxes? Let’s just say the word "CRA" makes your stomach clench harder than your grandma’s handshake.

First, let’s all take a collective deep breath…

Now repeat after me: “This is fixable.”

Because it is.

No judgment, no panic. Just real talk and practical steps.

Step 1: Own It (With Zero Shame)

You’re not the only one. Falling behind is a rite of passage for many small business owners, freelancers, and side-hustlers. Life happened. You were building your business, keeping clients happy, maybe raising kids or just trying to remember what day of the week it was.

So instead of guilt-tripping yourself into paralysis, let’s adopt the motto: Progress, not perfection.

Step 2: Find Your Starting Line (and Your Paper Trail)

Before diving in, gather all your ducks, receipts, bank statements, invoices, and credit card transactions. Even the crumpled ones in your glove compartment and the mysterious ones from “Square Coffee Something” in your bank feed.

You’ll need:

• Business bank statements (all accounts)

• Credit card statements

• Receipts for purchases and expenses

• Invoices you’ve issued

• Mileage logs or vehicle expenses (if applicable)

• Home office expenses (Wi-Fi, utilities, etc.)

• Any previous tax filings to compare against

Don’t overthink it. Just start dumping everything into one folder or box. Call it “The Comeback Pile.”

Step 3: Pick a System, Not a Spreadsheet From Hell

You don’t need a full accounting degree or a complicated ERP system. You need something simple, repeatable, and understandable. Some great starter tools:

• Wave Accounting (Free and friendly for beginners)

• QuickBooks Online (More robust, great for growing businesses)

• Excel or Google Sheets (Good if you like formulas and DIY magic)

If you’re the pen-and-paper type, that’s okay too, however don’t get lost in the weeds. The goal is to rebuild a picture of your business income and expenses for each month.

Step 4: Work Backwards in Chunks (Not in Panic Mode)

Trying to do 18 months of bookkeeping in one weekend? Nope. That’s how Netflix “accidents” happen.

Instead, use the “one month a day” strategy:

• Start with the most recent month you missed.

• Work your way backward one month at a time.

• Don’t worry about perfection, just focus on capturing all income and business expenses for that month.

Bonus tip: Create a “Progress Tracker” on a whiteboard or sticky notes. Crossing off months is weirdly satisfying.

Step 5: Bring in a Pro (AKA, Your Financial Therapist)

This is where a bookkeeper or accountant can become your new best friend. If your books are messier than a toddler with spaghetti, don’t be afraid to say, “Help me.”

A good professional can:

• Review and clean up your work

• Catch red flags or missing entries

• Help file late taxes (and potentially reduce penalties)

• Be your advocate if CRA comes knocking

  
  

Pro tip: Ask about Voluntary Disclosures Program if you’re more than a year behind with unfiled returns. The CRA can waive penalties if you fess up before they find you.

Step 6: File What You Owe, Even If You Can’t Pay (Yet)

Yes, it's better to file late than to not file at all. CRA’s late filing penalties are nastier than their interest charges. Even if you owe money and can’t pay right away:

• File your return to stop penalties.

• Call CRA or set up a payment plan.

• Avoid the ostrich approach (burying your head = not effective).

  
  

Pro tip: Even filing zero-income returns keeps you in good standing and preserves your access to GST credits, benefits, and RRSP contribution room.

Step 7: Create a “Never Again” Plan

You made it through the storm, so let’s build your raincoat.

• Schedule monthly bookkeeping days (put it in your calendar like a client meeting)

• Use tools like Dext, Hubdoc, or Google Drive to store receipts automatically

• Work with a bookkeeper quarterly, if monthly feels like too much

• Celebrate your progress (yes, a glass of wine or chocolate counts)

Final Thoughts: Your Future Self Will Thank You

Falling behind doesn’t mean you failed. It means you’re human, and now, you're the kind of human who gets back up, gets organized, and moves forward.

So turn on your favourite playlist, grab your receipts, and start untangling the numbers. Because nothing beats the feeling of a clean slate, and a tax return filed on time.

You got this.

late tax filing, catch up bookkeeping, small business Canada, CRA deadlines, tax clean up, bookkeeping help, tax stress, GST late returns, overdue bookkeeping, CRA penalties