Historical Bookkeeping for Late Tax Filers
Historical bookkeeping is a historical reconstruction of the company’s accounting records. For those who delay their tax settlements, this might be of great help especially in finalizing their tax obligations and eradicating the risk of being penalized.
How it works
Assessment of the situation: A professional accountant or bookkeeper would examine how far the records would go back in terms of being missing or inaccurate. They will delineate which period would need to be put back together and analyze which key financial events should be recorded.
Data gathering: Relevant documents such as banks’ account statements, invoices, receipts, and contracts would be gathered. If there are some records that are found to be missing, other records that are understood to be sources like credit card statements or emails concerning other businesses are used.
Transaction reconstruction: There comes a time when the accountant or a bookkeeper has to re-construct the financial transactions that are missing, and that is when the above information has been gathered. These include; determining the nature of the transactions that were conducted, entering relevant documents to the right accounts, and accurately reflecting the transactions in the books of accounts.
Financial statement preparation: Preparing financial statements, such as income statements, balance sheets, and cash flow statements, is the final step. All the documentation related to the previously missing transactions has been collected.
Tax calculation: The tax obligations for a particular period can be computed by the accountant or the bookkeeper based on the compiled financial statements.
Tax filing: After collating and completing the tax returns, they can now be submitted to the relevant tax authorities
Some of the important factors to consider
Timeliness: The earlier the historical bookkeeping procedure is initiated, the more advantageous it is. The longer the lag, the harder it could become to retrieve the lost records.
Accuracy: It is necessary to control the correctness and sufficiency of the retrieved documentation. Any unintentional mistakes present in the returned papers may result in the wrong amount of taxes paid and penalties.
Preventive measures: It can be of great help to hire a qualified accountant/bookkeeper who has been practicing historical bookkeeping as one stands to risk a lot of mistakes that are not necessary.
Where to Get Your Historical Bookkeeping Done
In conducting historical bookkeeping for those who happen to have filed for taxes late, several routes could be taken considering these factors:
Professional Accounting Firm: With a good-standing professional accounting firm, complete historical bookkeeping services are sought. This is because there are well-skilled professionals who are in a position to handle complex cases and ensure that there are proper records of the reconstructed accounts.
Freelance Bookkeeper: There are also many freelancers who specialize in historical bookkeeping. Generally, they tend to charge lower fees than accounting companies, but their qualifications and experience should be verified.
Online Bookkeeping Services: Additionally, many websites offering online bookkeeping services also provide historical bookkeeping. They may offer tools and templates to help you reconstruct historical records, but make sure to use a credible site.
Tax Preparation Service: Tax preparation services usually employ agents to provide clients with historical bookkeeping services. They assist in reconstructing financial records and filing taxes at the end of the year.
When choosing a provider, consider the following factors:
Experience: Choose a provider with a strong track record in historical bookkeeping and proven success.
Qualifications: Make sure the provider is duly qualified and certified.
Cost: Find out the prices of different providers and choose what will suit you best.
Reputation: Read the reviews and testimonials of previous clients to assess the provider’s reputation.
Timelines: Make sure to inquire about the structural periods, the historical bookkeeping that will take to complete, and if it suits you.
FAQ: Top Questions about Historical Bookkeeping Answered
Q: Is historical bookkeeping necessary for my small business?
A: Absolutely. It offers a clear picture of your past financial activities and is critical if you haven’t filed taxes in years.
Q: Can I do historical bookkeeping myself?
A: While possible, it can be complex and time-consuming. Most businesses find more value in outsourcing to professionals like Virtual Bookkeepers 365.
Q: What do I need to start my historical bookkeeping process?
A: Start by collecting all the past business transactions and financial documents. A professional accounting service can guide you through the process.
Individuals who file their taxes late can avoid facing consequences and ensure that they meet all their tax obligations in accordance with the law by accurately reconstructing their historical records and selecting a reliable service provider to handle their bookkeeping.
