Bookkeeping clean up checklist: scope, collect, reconcile, sign off

A clean-up quoted blind turns into unpaid hours. Before you name a price, find out how far the damage goes and what it blocks, such as an unfiled tax return or a loan renewal.

The last good month is the most recent month whose reconciliations still tie to the bank statements. Everything after it is in scope; everything before it can usually stay as it is.

Ask the client to list every account the business used in the period, including ones now closed. Closed accounts are where statements go missing, because the client no longer logs in to them.

1. Open the file and find the last month whose reconciliations still match the statements.
2. List every bank, card, loan and merchant account active since then.
3. Note the filings that wait on the clean-up: income tax returns, payroll returns, Forms 1099.
4. Set the end date of the clean-up and agree on it in writing.

A clean-up runs on statements. Send one request on day one for every account and month in scope, not one email per gap as you find it.

Track the replies on a grid with accounts down the side and months across the top. Mark each cell requested, received or reconciled. The missing bank statement tracker gives you that grid ready to fill.

Go back to the last good month, and at least to the start of the oldest tax year still open. The IRS says to keep records for 3 years in most cases, the window in which a return can still be examined (IRS, How long should I keep records?).

Some situations reach further. The IRS says to keep records for 6 years when income of more than 25% of the gross income on the return went unreported (IRS, How long should I keep records?). Employment tax records stay for at least 4 years after the tax is due or paid (IRS, How long should I keep records?).

If the client never filed a return for a year, the IRS says to keep records indefinitely (IRS, How long should I keep records?). In that case the clean-up is the first step toward filing, and the scope follows the unfiled years.

Start with duplicates. A bank feed plus a manual entry for the same payment is the classic case. Match each pair to the statement, keep the one that clears, and delete the other.

Next, code what is left uncategorized and build one list of unknown items for the client. Then reconcile each account, one month at a time, from the last good month forward. IRS Publication 583 describes the check: the statement, the checkbook and the books should agree, with differences such as bank charges or uncleared checks explained (IRS Publication 583, Starting a Business and Keeping Records).

By contrast, a stale check is a check written months ago that never cleared the bank. Voiding it puts the money back on the books, so get the client’s sign-off first and note the reason.

• Clear the undeposited funds account: every receipt there should match a real deposit.
• Remove paid or duplicated customer invoices from receivables.
• Match vendor bills to the payments that settled them.
• Tie payroll liability accounts to the filed returns and tax deposits.

Compare the clean-up’s opening balance sheet to the balance sheet on the last tax return filed. A difference you cannot explain needs a written note, not a plug to retained earnings without comment.

A clean-up often uncovers contractors who never got a Form 1099. The floor depends on the payment year: $600 for payments made in 2025 and earlier (IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025)), and $2,000 for tax years beginning after 2025 (IRS, Instructions for Forms 1099-MISC and 1099-NEC). Collect Form W-9 from each of them before you prepare late forms, and warn the client that a late or missing return can carry a penalty for each form (IRS, General Instructions for Certain Information Returns).

Check the payroll side the same way. Confirm that a Form 941 was filed and the deposits made for every quarter in scope, using the client’s EFTPS payment history and, where needed, an IRS account transcript.

Some statements cannot be found at all. When the bank cannot produce one, rebuild the month from the bank feed and transaction history. Mark that month as unreconciled in your sign-off memo so the client and the CPA know where the evidence is thinner.

A sign-off memo is a short note to the client listing the period cleaned, the accounts reconciled, the adjustments made and any months still lacking a statement. The client reads it and signs before you close the job.

Then set the closing date in the accounting software at the clean-up end date, so nobody edits the repaired months. Move the client onto a monthly routine with a fixed date for statements; the bookkeeping checklist sets out that rhythm.

• IRS Publication 583, Starting a Business and Keeping Records: Describes reconciling the checking account: the statement, checkbook and books should agree, with differences explained.
• IRS, How long should I keep records?: Keep records 3 years in most cases, 6 years if more than 25% of gross income went unreported, indefinitely if no return was filed, employment tax records at least 4 years.
• IRS, Instructions for Forms 1099-MISC and 1099-NEC: For tax years beginning after 2025, the threshold for reporting certain payments, including nonemployee compensation, is $2,000.
• IRS, Instructions for Forms 1099-MISC and 1099-NEC (Rev. April 2025): For 2025 payments, Form 1099-NEC reports nonemployee compensation of at least $600.
• IRS, Instructions for Form 1098: Form 1098 reports mortgage interest received from an individual, including a sole proprietor; it is not filed for interest received from a corporation, partnership, trust or estate.
• IRS, General Instructions for Certain Information Returns: A payer that fails to file a correct information return by the due date, without reasonable cause, may be subject to a penalty.