April 30 marks the tax deadline for Canadian personal income tax returns and millions of Canadians like you and I, will be waiting for the last week to do them. And since most tax professionals are fully booked this time of year, you have two options: buy tax software or run down to the local retail tax centre.
According to a survey compiled by the Bank of Montreal, 46 percent of Canadians opt to do their own taxes (whether by hand or using tax software). But should you be doing your own taxes?
The Bright Side of doing it yourself
If your tax return is pretty straightforward, most tax software can easily guide you through the process of filling out your tax return.
What do I consider straightforward? Well, if all you have is some employment income, bank interest, maybe a couple of investments, and some donation receipts to report, you’ll likely find that doing your own return, isn’t as daunting as one might think. In fact, there’s quite a few advantages to doing it yourself:
- You’ll learn a little more about your finances. And that’s a good thing! You’ll start to see first-hand how everything affects your taxes. For example, are you receiving any added benefit from contributing more to your RRSP? Et cetera. Some tax software programs give you a running total, so you can see how each number you input, directly affects the final outcome.
- Avoid the lineups. With tax software you get instant feedback. No having to wait for someone to complete your return or wait sometimes hours in line at a retail tax centre just to speak to someone.
- It’s less costly. Yes, some tax professionals claim that you could be missing out on some tax credits, but tax software today has gotten pretty good at alerting you of any possible deductions/credits you may have missed. And for most simple returns, sometimes the cost of paying someone else to do it, can outweigh any small tax credits gained. For a list of credits and deductions available to Canadian families this year, check out this great tax guide compiled by Today’s Parent.
Free Test Drive
By this time you’re thinking okay, so I have to learn about tax credits and deductions. Here’s the thing: most tax software, such as UFile and QuickTax/Turbotax allow you to prepare your complete tax return, online for free. You only pay when you’re ready to file. Which means you try it out for free, risk-free. These companies also offer fully free versions, but always read the fine-print. There’s usually income limits and other restrictions. But there’s also plenty of other completely free tax software solutions available such as SimpleTax and a host of others, listed on the Canadian Revenue Agency’s website.
Which tax software you choose is more a personal preference. I’ve used Ufile, QuickTax/Turbotax and a couple of others through the years. Some have been better than the others in some years and not in others. In the end, no software gave me a greater tax return over the other. Some are just simpler to use and make it easier to find those tax credits.
But it isn’t for everyone
If your tax return is much more complex or you need more specific professional advice, hiring a professional can be worth every penny. My wife runs a business and for years we were still doing our own taxes, but a couple of years ago we decided to turn to a tax professional for help on all our quarterly and annual tax returns. Although it seemed expensive at the time, it was well worth the time, money and energy for us.
Now if you’re using a retail tax service like H&R Block, then you may as well get the tax software, save yourself the hassles, lineups and the money. Heck, even use their own software! The big difference between those services and those of a tax professional, such as the one we use, is that at the H&R Block’s, your service stops when you file your taxes. A ‘real’ tax professional can guide you to better tax planning throughout the year, which can be well worth it, especially if you run your own business.
In the end, I think tax software can work for most, but everyone’s tax situation is a little different and you need to choose whatever works for you.