Behind on your corporation's books? How catch-up bookkeeping is priced

Catch-up bookkeeping is usually priced by the hour or as a project quote based on the number of months behind, the number of accounts and the volume of transactions, plus the cost of preparing any unfiled financial statements, T2 returns and sales tax returns. It is almost always more expensive per month than regular bookkeeping, because records must be found, reconstructed and reconciled after the fact. The faster you gather bank statements and the sooner you file overdue returns, the lower both the fee and the penalties tend to be.

This guide is part of the annual accounting cost estimate guide. All figures are illustrative.

What drives the price of a catch-up

Driver	Lower cost	Higher cost
Months behind	A few	Several years
Bank and card statements	Downloadable for the whole period	Must be ordered from the bank
Receipts	Organized by month	Missing or mixed with personal
Accounts	One bank, one card	Many, including personal accounts used for business
Sales records	From one system	Cash sales without records
Filings outstanding	None	Several T2s, GST/HST returns and slips
CRA status	No letters	Demands to file, arbitrary assessments, collections

Step 1: find out exactly what is outstanding

Before asking for a quote, list:

The last fiscal year for which a T2 was filed
The last GST/HST (and QST) return filed
Payroll remittances and T4/RL-1 slips missing
Dividends paid without T5 slips
Any CRA or Revenu Québec letters, especially demands to file or notices of assessment based on estimates

Your accountant can view filing status through CRA representative access once you have authorized them.

Step 2: estimate the hours

An illustrative way to estimate catch-up bookkeeping hours: hours per month of regular bookkeeping x a catch-up multiplier for reconstruction work. A multiplier of 1.5 to 2 is a reasonable working assumption where statements are available but receipts are disorganized; your bookkeeper may use a different figure.

Illustrative example

A consulting corporation is 18 months behind. Regular bookkeeping would take about 4 hours a month.

Bookkeeping: 18 months x 4 h x 1.75 multiplier = 126 hours x $65 = $8,190
Two years of year-end compilations and T2s: 2 x 10 h x $150 = $3,000
Six quarterly GST/HST returns, plus one amended return: 7 x 2 h x $65 = $910
Total: $8,190 + $3,000 + $910 = $12,100, plus sales tax

If the owner first downloads every bank and card statement and sorts receipts by month, the multiplier might drop to 1.3: 18 x 4 x 1.3 = 93.6 hours x $65 = $6,084, saving about $2,100. Enter your own hours into the fee estimator.

Step 3: control penalties while the work is done

Late returns carry penalties based on unpaid tax at the due date, and interest keeps compounding daily. Practical steps:

File the oldest returns first and file as soon as each is ready, not all at the end.
Pay estimated tax where you know some is owing, to stop interest on that amount.
Respond to every CRA letter by the date given, even if only to explain that returns are being prepared.
Ask about relief. The CRA's taxpayer relief provisions allow it to cancel or waive penalties and interest in some circumstances, such as serious illness or events beyond your control, for requests made within ten calendar years after the end of the year in question. Financial hardship or inability to pay may also be considered for interest.
Consider the Voluntary Disclosures Program only after professional advice, if there is unreported income or an error the CRA does not yet know about. Its conditions and eligibility have changed over time; check the current CRA rules.

The penalty rules are in late-filing penalties for T2 and GST/HST.

Step 4: agree scope in writing

Catch-ups grow if the scope is vague. Ask for:

A quote by phase: bookkeeping by year, then statements and returns by year
An hourly rate and a cap or approval point
A list of what you must supply and by when
Who will deal with the CRA in the meantime

See the engagement letter guide.

Step 5: stop it happening again

After the catch-up, move to monthly bookkeeping or a hybrid model with bank feeds and a monthly review. The automation payback example helps you decide whether software is worth it, and the year-end package checklist keeps the next year end on schedule.

Mistakes to avoid during a catch-up

Recreating receipts or invoices after the fact; supporting documents must be genuine.
Guessing sales tax figures to file faster, then having to amend.
Ignoring payroll: unremitted source deductions are treated seriously, and directors can be personally liable for them.
Mixing personal and business transactions in the reconstruction without documenting them.

When to involve a tax lawyer

If the CRA has started collection action, issued requirements to pay to your bank or customers, or if there may be unreported income, get advice from a tax lawyer or an experienced CPA before filing. Communications with a lawyer may be protected by privilege; communications with an accountant generally are not.

Frequently asked questions

Can the CRA assess my corporation without a return?

Yes. The CRA can issue an assessment based on its own estimate when a return is not filed. Filing the actual return is usually the way to correct it.

Is catch-up bookkeeping deductible?

Fees for bookkeeping and accounting for the business are generally deductible in the year incurred, but ask your accountant about timing.

How long does a catch-up take?

It depends on the volume and how quickly you supply records. Ask for a timeline by phase.

Sources

Canada Revenue Agency — late filing, taxpayer relief, the Voluntary Disclosures Program and directors' liability
Revenu Québec — Quebec filings and the voluntary disclosure program
Justice Laws Website — Income Tax Act and Excise Tax Act