Tax time has rolled around again and the first choice you need to make is whether to do-it-yourself or hire a tax professional.
Everyone has their own style when it comes to filing their tax returns. Some people find them scary and the thought causes panic. One of my colleagues meets a client in the parking lot, conducts the interview in their car and then heads back into the office to prepare the return. The client cannot overcome his fear of taxes to actually come into the office.
Other people are empowered by the challenge of completing their own return using either downloadable or online tax software. Or perhaps they don't want to share their financial information with a third-party.
No matter how you choose to do your return, you want to make sure you are claiming all of the credits and deductions available so you don't pay any more tax than needed. If you are trying to decide whether to tackle your tax return yourself or trust it to a professional, you should evaluate your skills and personality.
For people looking to do it themselves using software or paper and pencil, here are some things to consider:
1. You need to be patient. Tax forms can be a pain. They are complicated and require examination, cross-referencing and scrutiny, followed by more examination. Your tax return is not something to dash off one evening, especially if you're using paper forms. If you're using free online software, you'll be talked through the process in a narrative fashion.
2. You're good with numbers. Not all of us are. (I am. That's why I'm a tax professional.) No matter how you prepare your return, you are ultimately responsible for what you submit to the Canada Revenue Agency. So if you enter all of your numbers and something doesn't seem right, make sure you are confident in your math skills to check your return. The government very rarely gives you back money without a reason.
3. You understand your tax situation. Consider your tolerance for detail and complexity. This is particularly important if your circumstances have changed from the previous year. If you are sure you have all your slips, receipts and other paperwork and you know what you need to claim, tax software makes it easy to report everything to the CRA.
4. You're uncomfortable sharing your financial details with a third party. A tax professional should ask you lots of questions about your situation to make sure you don't miss a thing. It can be an awkward situation if you prefer not to divulge all your information to another person. It is your return and you can keep it just between you and the government if that is your preference.
Though there are Canadians who admit they enjoy preparing their own return, there are others that would rather do anything else. There are times when finding a tax professional to prepare your return makes sense.
1. Your family situation has changed. Perhaps you got married. Perhaps you had a child. Perhaps you entered into a common-law relationship with someone who has a dependent child. Or you got separated or divorced, and you and your ex are arranging a custody agreement. These can make your tax return a little more challenging.
2. You're self-employed. Depending on the complexity of your business, you may already be working with a bookkeeper or accountant. If you're not, it may be worth your while to have a tax professional handle your first fiscal year. They will show you the nuts and bolts of claiming expenses, reporting income, and the impact that GST/HST has on your return. You might choose to do it yourself in future, but you'll learn valuable lessons. Make sure you've got your paperwork in order beforehand.
3. You have more complex investments. Particularly if you've divested yourself of some of these investments in the last year, you're going to want professional help making sure they're reported properly, and that you pay the minimum amount of tax on these investments. The tax professional can also offer advice on how to handle any upcoming tax implications of your investments or gains.
4. You think you're likely to be reviewed or audited. According to the CRA, moving and employment expenses are two deductions more likely to be reviewed than others. Your tax professional should offer year round support, which would include dealing with the CRA in case they ask for additional information on your return. Or if you are audited, your tax professional should be there to explain to the CRA how your return was prepared at no extra charge.
File it yourself, or use a tax pro, but file by the deadline and keep all of your receipts and slips. The CRA doesn't care how you prepare your return but they do expect you to have all of the supporting paperwork if they ask for it.
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