“Optimist: Someone who sets aside two hours to do his income tax return.” – Unknown
Does the thought of filing your taxes make you wish you could hide under a rock until it’s all over? Last year, I posted some tips for the tax preparation process: Tax nightmares? Tips for a smoother return and Still in a nightmare? More tips for a easier return. Check those out for a quick refresher.
This past week, a friend of mine was complaining about a specific tax software program on Facebook and it got me thinking about how tiresome it is to figure out which filing option is best in your particular situation. Here are the various options available to you, with my quick thoughts on each.
DIY – paper
I can’t imagine running through all the tax calculations on paper, but apparently 25% of Canadians still file their returns this way. Tax packages are available to view and print on the CRA web site. If you can’t print your own package, you can order online here. It may seem strange to be able to order a package online but not be able to print it yourself, but I can see the application for this for snowbirds still in the south without printer access.
DIY – Software
Software is definitely a step up from paper – less prone to error, more environmentally friendly, with a faster refund because the filing process is easier. Using software and filing electronically also reduces the cost of processing your return for the public purse.
The only downside to software that I have noticed is that it gives people a false sense of accuracy. The old saying “garbage in, garbage out” still applies. If you don’t know what you’re doing and you put the numbers in the wrong place, the software is not going to magically fix it for you. Software is great for calculating, but not so great for mind reading. Some software does offer diagnostic information or interview-style questions that can help with this, but you still need to take the time to make sure your return is complete.
Any software that you choose needs to be certified by Canada Revenue Agency. This means that CRA’s technical people have tested it to make sure that it does the calculations correctly. You can find a list of certified software here. At the time of writing, there are 10 different desktop options for Windows and 9 different online products (note that the list is being updated daily as more testing occurs). Which option should you use? I’m declining to offer an opinion on this issue for two reasons. First, I’ve only used one program on the list. Second, I’m in negotiations for some contract work with a tax software company, so I’m not impartial on this issue anymore. If you’ve used software to prepare your return before, please feel free to offer your opinion in the comments!
Get help – Volunteer programs
You may be eligible for free tax preparation services. The Community Volunteer Income Tax Program is available for Canadians with modest income and uncomplicated returns. You can read more about the specific eligibility requirements here, and locations here.
The Chartered Professional Accountants of Ontario also offers free tax clinics to those with household incomes below $30,000 with dependents or $20,000 without dependents. Those with rental income or self-employed income are not eligible regardless of income level. You can find clinic locations here.
Get help – Hire a professional
If your situation is more complex and/or you aren’t willing to sift through the tax guides yourself, there is nothing wrong with hiring someone to do it for you. As the quote at the beginning of this post implies, it takes some time to prepare your tax return. If you spend your time doing your taxes, you’re taking time away from something else. The time a professional can save you will contribute a lot more value to your life than the money you’ve spent hiring them.
When choosing a professional, the options are going to vary a lot in price and qualifications. You get what you pay for. Being a CPA, CA, I am biased in telling you that letters matter. A CPA, CA is personally liable for the advice they give you, so they are going to make sure they know what they are doing. A tax preparation service chain of offices is probably going to be less expensive, but the level of service and expertise may or may not be the same as a professional firm.
On that note, on our recent trip to Arizona, we noticed that a popular advertising method there seems to be having people dressed as mascots stand with signs on the street to try to get drivers to notice their product/service. That might make sense for fast food or attractions for children, but we also saw numerous people dressed as the Statue of Liberty with a sign for tax preparation services. Maybe it’s just me, but seeing a mascot on the corner doesn’t exactly inspire confidence in their ability to prepare a tax return, particularly when my son pipes up from the back seat asking “Mommy, why is the Statue of Liberty smoking on the corner holding a sign?” Bottom line – be careful who you hire.
Since I anticipate running off my feet with contract work for the month of April, this will be my last post until May. Many happy returns, everyone!
What method are you using to file your taxes this year?