Happy Tax Deadline Friday everyone!
It’s a mini-miracle being able to publish a quick edition of Toonie this week. CRA figured it’d be smart to ensure online services take a break before the big day tomorrow, so a few hours of downtime opened up some writing time.
I should probably take a breather, but I can’t see Toonie stay still for too long.
So this week, I’ve got a quick recommendation before heading into the biggest tax day of the year.
You Should Probably Use SimpleTax to File Your Tax Return
It’s probably asinine to suggest you use free online software to file your tax return. For one, I’m putting myself out of a job! And for two, D-I-Y tax returns are bound to produce an error or two.
But don’t fret! I have a few reasons for the recommendation.
If you have a reasonably simple tax return to file, I recommend using an online tax filing program like SimpleTax to get the job done. I would define “reasonably simple” as:
- Exclusively T-slip documentation: If all you have are T4s and T5s, your return would be classified as reasonably simple. These slips can all be imported from CRA.
- Employment income: If you only have employment income (vs. having self-employment income), you’re return is likely reasonably simple. (Note that this does not include commission income as reported in Box 14 and Box 42 on your T4.)
I think, if you fall into either of the two categories above, you’re a strong candidate to use a program like SimpleTax to file your tax return.
Ensuring You Don’t Miss Anything Important
The Canada Revenue Agency has a great deal of information about you long before you ever file your tax return. If you’ve filed a previous tax return, CRA will be aware of your address, your earnings, your spouse and their earnings, and your children/dependents and their earnings. CRA also knows a great deal about your savings balances, the various credits you’re eligible for, and whether or not you have outstanding cheques to deposit.
The CRA knows a boat load about you. It’s unavoidable.
When I begin a tax return for a client, the very first step is to import all client tax data for the current tax year from CRA. The import process takes about a minute, is protected by multiple layers of security, and is bound to misfire a time or two.
But after that minute, all processed T-slips, RRSP data, disability tax credit information, reassessment information, and more shows up in our tax program.
The import process saves a great deal of time transcribing information and it prevents numerous typing errors.
This import process is also available in free online software like SimpleTax, H&R Block, or Turbotax. **After a few quick steps, you can import all the same information into your return that an accountant can, and you may even discover a few missing slips along the way. **
Ideally, importing all your CRA documentation in one quick swoop should alleviate any concerns you may have about missing important information. If the CRA has the data, then importing from CRA will ensure you’re not missing major red flags right from the start.
Most online tax filing programs today have a reasonable to good user experience. My particular favourite is SimpleTax — Wealthsimple’s simple, elegant, and utilitarian design transcends everything in SimpleTax and makes for a pleasant tax filing experience. (Or, at least as pleasant as it can be.)
These programs guide you through the tax filing process — they provide questions and queries to answer for personal information, your different sources of income, your various deduction and credit eligibilities, and your overall tax liability. The questions are well worded, easy to understand, and generally do a good job of ensuring you have the right information in the right box.
This is, for all intents and purposes, the most important factor for most people. Why would you hire an accountant for $85 to $300 when you could file your tax return for free online?
You’re not wrong. You’re not wrong at all. If you have a reasonably simple tax return, there’s no sense in paying an expert hundreds of dollars to file it for you.
*Tax professionals have expertise. They sell their time. You pay for that expertise and you rarely get a discount if that expertise isn’t fully utilized. *
There is, undoubtedly, a large savings by filing your return yourself online.
When to Hire an Accountant
But of course, there are numerous reasons to hire a tax professional to file your tax return. Anything more than a “reasonably simple” tax return may have tax planning opportunities to minimize tax. And there’s a great peace of mind knowing an expert has looked over your return and is ready to answer tax authorities if they come knocking.
Here are a few reasons to hire an accountant to file your tax return, in no particular order:
- Continuity: If you have the same person file your return year after year, you have the same person watching over your financial life, tracking your progress, and helping you execute a long-term plan.
- Knowledge and Advice: The obvious reason — a tax professional will know what you can and can’t claim on your tax return, and they’ll know how much risk is too much risk when completing more complex parts of your return.
- Tax Planning: It’s one thing to know how progressive tax systems work. It’s another to understand how different sources of income affect different tax brackets and how to minimize tax over the course of your entire life. Have large bursts of big income now and expect a loss next year? A tax expert will be able to nicely plan around inconsistencies and even out your cash flows over long periods of time.
- Correspondence: There’s nothing more petrifying than receiving a letter in the mail from CRA. What if you could forward all your CRA mail to a professional who can take care of the issues for you? Well, that’s entirely possible with Represent a Client authorizations for tax professionals. All communication with CRA can be handled by the professional and they can correspond with you if required.
There are certainly other reasons to hire a CPA or tax accountant to file your tax return. But these are some of the core areas where tax professionals can provide value right now.
There’s a great squeezing in the tax world right now. One that’s a bit unnerving for a relatively traditional, slow-to-change industry:
*The simplest tax returns are increasingly best served by online services like SimpleTax. And the most complex tax returns are best served by ultra specialists tax lawyers who charge a $1,000 an hour. *
If you find yourself somewhere in the middle, you’ll have some cost-benefit analysis to undertake to determine if a tax professional is a worthwhile investment.
But, from my seat, I don’t think there’s anything to be ashamed about for trying to save some cash and filing your tax return via SimpleTax. It’s a great program, covers a surprisingly deep level of tax depth, and has a great user experience.
Here’s to a happy and healthy first weekend of May — summer is almost here!
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