Online tax software is budget-friendly and time-efficient, but depending on the complexity of your situation, hiring a tax professional may be preferable.
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The official deadline to file your Canadian personal income tax return for 2020 and pay any taxes owed to the Canada Revenue Agency (CRA) is April 30, 2021. For Quebecers only: You can file your return up to May 30, 2021 and you will not be penalized. You can read more about this here. |
Tax season is here, yet again. If you’re a tax filing veteran, you’re likely comfortable filing your tax return yourself, without any help. There’s satisfaction in doing it yourself and as it turns out, you might even enjoy it.
Canadians still love their tax refunds, but with an increasing number of people missing refunds due to costly mistakes, you might be torn over whether you should go the do-it-yourself route or if now is the time to employ the services of a tax expert.
An error on your tax return can lead to a penalty, interest charges or even an audit by the CRA. Perhaps most importantly, however, you may miss out on valuable tax deductions or credits.
Continue reading to learn how to decide whether tax software will do the job, or you require professional help.
When To Do Your Taxes Yourself
Preparing your own tax return should be easy if your financial situation is simple. We’ll call these people Tax DIYers, where DIY stands for “Do-It-Yourself!”
TurboTax and other off-the-shelf tax preparation software options will walk you through a series of questions about your finances and alert you to any credits and deductions you may qualify for. They don’t require any math calculations or in-depth knowledge of the tax code.
But how do you determine if your position is simple?
- If preparing your taxes just requires you to pull information from a handful of documents prepared by others, such as the T4, you’ll find basic tax software suitable.
- If your tax situation hasn’t changed over the last year, you work for an employer, are single with no kids, etc., your tax return would be very straightforward.
- If nothing is going on in your life that can complicate your tax situation, it might not be worth paying a professional.
When to Hire a Professional
You might be better off hiring an accountant than trying to do your tax return yourself in some situations.
Tax preparers stay up to date on tax codes as well as provincial and federal tax laws.
An accountant can recommend what deductions and exemptions you qualify for and help you plan for future growth by informing you about any tax requirements changes.
Hire a tax expert in case of:
1. Major Life Changes
If you recently got married (congratulations), you might need a professional to guide you on the tax filing status to use. While most couples prefer filing jointly, there are some situations where it makes more sense to file separately.
It’s not just marriage. Other life milestones like expanding your family and having a child, losing or getting a new job, graduating from college and relocating could all impact your tax return and your potential total refund.
An accountant can help you learn about any new benefits or tactics to minimize your tax liability. This way, you will be able to take advantage of every tax break available to you.
A tax professional can also help you learn to navigate your tax return this year, so you feel confident doing it yourself in the future. You can always revert to doing your own taxes if you don’t experience any other major life changes the next year.
2. Failing to Pay in the Past
If you failed to file necessary tax returns in the past years, reach out to a tax expert.
They know about the programs offered by the CRA for individuals in this situation. A tax accountant can help you file years’ worth of returns, something that might take you a long time to master, especially as the April 30 tax filing deadline approaches.
This gives you confidence that your tax return is filed correctly and the peace of mind that you’re in good standing with the CRA.
3. Owning a Business
If you are a business owner, you should probably consider hiring an accountant to prepare your tax return.
Almost every financial transaction comes with some kind of tax consequence. Your accountant will prevent you from making any costly mistakes, help you report tax items accurately, and maximize deductions.
You should also use a tax preparer if you purchased rental property during the year.
4. Simply Not Having the Time
Tax preparation involves gathering documents, reviewing the procedures, and filling out tax forms. It is a notoriously slow and boring process, which is why so many of us dread it and postpone it until the last minute.
While doing this might seem like a simple weekend project for some Canadians, for others, not so much. Maybe you feel that the time you’d spend doing your taxes would be better spent elsewhere.
Consider hiring a tax expert if you lack the time or patience to prepare your own return.
In Conclusion
There is no universally correct answer when it comes to filing your taxes with software versus hiring an accountant or tax professional. Ultimately, the choice comes down to the complexity of your tax situation.
If your tax situation is fairly straightforward and you have some confidence in your ability to work step-by-step through tax software, it’s relatively cheaper to do your own taxes this way.
If your tax situation is more complicated, hiring a tax preparer can be worth the expense.
Just ensure the preparer has the right credentials and stellar testimonials to avoid being a victim of tax scams.
Over to You…
Irrespective of whether you file your own tax return or hire someone else to do it, have your return in by April 30.