Cleanup guide
Several Years Behind: Which Year Comes First
The default is oldest first, because every year opens with the last one’s closing balances. Four things can change that order, and all of them are deadlines.
Why oldest first
Books are continuous. The cash, debts, assets and equity at the end of one year are the starting point of the next. If a later year is built first, its opening balances are guesses, and when the earlier years are finished those guesses have to be replaced and the later year reworked.
Returns follow the same logic. Depreciation, loss carryovers, shareholder basis and loan balances all carry forward from year to year, so a return prepared out of order may need to be redone.
Four things that change the order
Payroll and sales tax
These come before any income tax work, whatever the year. The current period is made right first so the problem stops growing, and back periods follow.
A response date on a letter
If the IRS or the state has asked about a particular year, that year’s records are built first, at least for the items the letter raises.
A lender or buyer
A lender usually wants the current year to date and the most recent filed years. Those are prepared first, with opening balances taken from the last filed return.
A return about to become later
Penalties for late filing are counted by the month, up to a limit. A return that is only recently late is still getting more expensive, while one that is several years late has usually stopped. So the most recent unfiled return is often prepared early. There is also a limited window for claiming a refund on a late return, and a year close to the end of that window moves up.
The usual order, when nothing is on fire
- Bring current payroll and sales tax filings up to date
- Find the last year that was filed and can be relied on
- Rebuild the next year’s books, then prepare that year’s business return
- Prepare the owners’ personal returns for that year
- Repeat for each year in turn
- Keep the current year’s books running alongside, so it does not become the next back year
The last point is easy to miss. While old years are being rebuilt, the current year carries on. We start the monthly bookkeeping for it at the same time.
Frequently asked questions
Should I file the most recent year first or the oldest?
Books are rebuilt oldest first, because balances carry forward. The filing order can differ: a recently late return is often filed early to stop monthly penalties, and a year with a letter or a lender waiting moves up. We set the order at the start and explain it.
Can I skip the old years and just start fresh this year?
For the books, sometimes: opening balances can be set from the last filed return. For tax returns, no. Years that were required and not filed remain open until they are filed. See unfiled business returns with no books.
Do my personal returns have to wait for the business ones?
Usually yes. For a sole proprietor the business figures are part of the personal return, and for an S corporation or partnership the personal return needs figures the business return produces. So each year is done business first, then personal.
Not the question you had? The full tax FAQ covers more ground, and our client reviews say what the work is actually like.
Related situations and guides
Books that are years behind
Two to five years or more with nothing entered. How a multi-year rebuild is ordered and what it needs.
Learn moreUnfiled returns and no books
Returns went unfiled because the numbers were never there. Books first, then every open return.
Learn moreHow a cleanup works, step by step
The seven stages from first call to current books, and what each needs from you.
Learn moreA tax deadline and no books
The return is due and there are no numbers. What gets done first and what an extension really covers.
Learn moreCleanup Planner
Eight questions, then a plan: what comes first, what to gather, and which guides apply.
Part of Messy Books Help, alongside our catch-up bookkeeping service.
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