Should You File Your Own Taxes? What to Know Before You Click
Filing your own taxes seems easier than ever, but how do you know what’s involved and whether this is a good option for you?
For some people it makes a lot of sense to use these free or low-cost services. For others, it may not be worth the time or uncertainty. And for many, especially those who are business owners or those with financial scenarios that are beyond the basics, you might miss out on tax savings that a professional accountant – a person with experience and professional judgment – can provide.
What’s involved with online tax filing and how does it work?
Contrary to a lot of reports, being able to file your own taxes isn’t actually new. CRA’s NETFILE has been around since 2001, but it hasn’t always been easy to use. Over the last few years, however, several new online tax preparation solutions have come onto the market. These online solutions provide a more user-friendly way for you to complete your taxes and then file your return directly with NETFILE, which is administered by CRA.
Before you contemplate doing your taxes online, make sure that the software is approved by CRA. Check here for CRA’s approved list of online services.
How long does it take?
That depends on several things, including your comfort level working online. Generally speaking, it seems to take about one or two hours to complete a simple, straightforward tax return online. Some people may find it takes a lot longer, since there’s often quite a bit of anxiety — double and triple-checking — before hitting “send” to CRA!
Who’s eligible for online filing and who’s not?
Most taxpayers are eligible for online filing, but some tax returns cannot be filed electronically. For example:
- If this is your first year filing an income tax return with the CRA and they don’t have your complete date of birth on file
- If you declared bankruptcy in 2014 or 2015
- If you are a non-resident of Canada
- If you have income from a business with a permanent establishment outside your province or territory of residence
Get the full list of CRA limitations here: http://bit.ly/1B5Oli8
What to watch out for
Do-it-yourself online tax filing is a reasonable alternative for many people. However, here are just a few of the scenarios to watch out for:
- If you’re self-employed, be aware of which expenses you can claim and which might trigger an audit. So often we’ve had clients say, “my friend told me he always claims these”. It’s great to get input from friends and colleagues, but only a professional accountant can give you the straight goods on which expenses you can and should claim, and which will put you at risk for trouble down the road.
- If you have investment income, make sure you assemble ALL your information – which is often more than just your T3s and T5s. We’ve caught many potential mistakes by reviewing statements from year to year, identifying investment sales that would have gone unreported simply because clients are busy. It can be easy to overlook.
- If you experienced a major life event in 2014, and I’m NOT talking about winning the lottery! That would be great and we’d all be happy for you. But as an example, if you got married last year you have some new options. If you have new dependents, there are so many credits available to you now. If you got divorced, the tax situation can be extremely complicated. If someone passed away or if you’re moving out of the country, there are lots of tax complexities to navigate.
Conclusion: Whatever you choose, make sure you’re fully informed
If your income is under $20,000 per year, or if you have a simple return with one T4 slip and you are comfortable with online systems, then filing your tax return yourself could work very well for you. It keeps your costs down and there is almost no risk that you’ll miss out on any deductions.
However, even for those whose situation is straightforward, many are choosing to have a professional accountant prepare their return. Their reason? They want to build a relationship with a trusted advisor who’s got their back – someone who can give guidance throughout the year or even go to bat for them with the CRA, if necessary.
If you run a business, have investments or have experienced any major life events, it’s in your best interests to consult an accounting professional. The benefits of getting professional advice and guidance (like peace of mind, time savings, tax savings, returns done correctly) will far outweigh the costs.
Remember! If you’re self-employed, CRA wants your tax and your GST returns filed by June 15th but taxes are due April 30th.
Candace Nancke is the managing partner at Loren Nancke. She has served as Chair of the Board of Governors for CGA-BC and has been designated as a Fellow of the Certified General Accountants of Canada (FCGA), one of the highest honours awarded to certified general accountants in Canada. You can reach her at 604-904-3807 in Vancouver, British Columbia.