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Do I Need to Do Back Work, or Just Back Taxes?

March 7th, 2024 | 6 min. read

By Bryan Cremeen

So, you’re the owner of a small business that has fallen a little behind, and your taxes didn’t get filed. 

We all know this can be a pretty big deal, especially if you didn’t get an extension, but what can you do about it? You’ll have to go back and get your taxes filed. 

However, if you’re not very far behind, will you have to adjust some months in your books as well? After all, if you already paid a professional to do them, you don’t want to pay for it twice if you don’t need to.

At CSI Accounting & Payroll, we’ve worked with small business accounting and taxes for over 50 years. Frequently while onboarding new clients, they ask us:

  • Is there a difference between back work and back taxes?
  • Can I just do back taxes and skip back work?
  • What are the signs of low-quality books? Why does it matter?

Blog - Do I Need to Do Back Work, or Just Back Taxes

Back Work vs. Back Taxes

Back taxes are tax filings that were missed or incorrect that an accountant needs to do (or re-do) for you. Business owners are usually aware of when their taxes aren’t filed and realize that they need back taxes done.

Back work is a little more complicated. It refers to the bookkeeping portion of accounting. Back work is needed when your books have fallen behind or have been done incorrectly. An accountant can help you with this, too. 

In other articles, we have used the terms “back work” and “back taxes” interchangeably. However, they mean different things – it’s just that they often occur together. If someone needs back taxes done, they’re usually going to also need back work done.

Let’s look at the situation that everyone hopes for: the one where back taxes are all that you need.

When Only Back Taxes Are Needed

Joining at Year-End

Let’s say you come on board with CSI right at the end of the year. Your books are all done, but for some reason, you don’t want your prior accountant who did your books to also do your taxes

We would still review your books, but if they look fine, there’s no need for us to touch them. However, this doesn’t happen too often – we usually find errors in these circumstances. 

After all, what was the reason why you didn’t want your prior accountant to do your taxes? Is it because they have made a lot of mistakes in the past?

Joining Mid-Year

You also don’t have to join us at the end of the year! Come on board whenever you want. We get lots of new clients year-round. 

In this instance, we start working with the numbers from your last filed tax return or your last independently prepared financial statement, but there is still a chance that some back work will be needed.

The Signs of Low-Quality Books & Why It Matters

Having low-quality books is just as bad as not having any books done! This is true for three main reasons:

  • Difficult to get loans or investors. Banks and investors need to see your books before offering up their money. They do this to see the state of your finances and your ability to pay them back. If your books have glaring red flags, they’ll run in the opposite direction.
  • Incorrect numbers run on. In accounting, your numbers build off of each other month-over-month. If your books are wrong in January, they’re still going to be wrong in December unless you went back and fixed all of the numbers from the exact moment they went wrong.
  • No accurate, timely financial insight. The huge selling point in monthly accounting is that you always have current financial insight to make the best decisions year-round. If your books are wrong, you could make a decision that’s not a great call for your business.

How do you know if your books are in good shape or bad shape? This is what the accountants at CSI look for when determining if your books are healthy or unhealthy. You will need back work done if:

  • Your bank accounts and credit cards are not reconciled through the end of the year.
  • There are any negative balances.
  • Any loans do not have accurate balances.
  • Any state or sales taxes are not recorded.
  • Any payroll is not recorded.

You can also read more about the top 12 red flags for an income tax audit!

When you come on board with CSI, you won’t have to worry about these red flags anymore. The only things we may ask you to review are certain transactions or distributions that we may need some clarity on.

Get Your Accounting Back In Order!

Now that you know about the difference between back work and back taxes, when you only need to do back taxes, and what to look out for in your books, are you ready to check out monthly accounting services?

If so, please consider CSI Accounting & Payroll! To see if we can be a good fit for your business, click the button below for a free consultation:

Not ready to talk? That’s okay! First, learn more about how much back work might cost you and the value it offers.

Bryan Cremeen

Bryan joined CSI Accounting in 2019. He joined the team after CSI purchased his accounting firm, AccountSource LLC, which he had owned since 2005. He graduated from St. Cloud State in 2001 with a Bachelor's Degree in Accounting and has been an Enrolled Agent since 2010. Before owning his own accounting practice, Bryan had worked at the State of MN handling financial reporting and had been in private industry as a Controller. His primary responsibilities include overseeing the accounting department and making sure clients are receiving quality service. Fun Fact: Bryan has played soccer since the age of 4. He still plays soccer year round through various adult leagues and is an avid supporter of the Minnesota United MLS soccer team. COYL!!! (Come on, you Loons!!!)