Filing your taxes. When do you need the help of a tax professional?
It’s tax season! Many Canadians think filing taxes is confusing and intimidating. Its not uncommon to turn to tax professionals to help us in filing a yearly return. But do you really need one?
Certified accountants aren’t free. The fees can range from hundreds to thousands of dollars, depending on the complexity of your return.
It might be easier to turn to the experts in situations like these. Just don’t have the time? Want to keep stress to a minimum? That’s understandable.
However, filing your own return is not as complicated or time-consuming as you may think. And even better…
Filing your own taxes helps you understand your finances better
Developing tax literacy by doing this can help you make better long term financial decisions. What are you actually earning? What are your expenses? Does your back-of-the-napkin budget actually reflect what’s going on? This is one time of the year where you can really dig into where you’re at, money-wise.
Do some prep work by collecting your receipts, income slips and deductions that you would have otherwise given to your accountant.
“What forms do I need to get started with filing my taxes?”
If you are employed, you get a standard T4 slip from the company. That’s a good place to start. It will show you how much you earned and how much tax they already deducted.
Did you make RRSP contributions? Then you’ll be getting two receipts from your financial institution. The first shows how much you contributed from March to December of last year. The second one will show you how much you contributed in the first 60 days of this year. You can use these contributions to help lower the amount of tax that you’re paying. RRSP contributions are not taxed. That money is taxed after you retire as you take income from an RRIF, probably at a lower rate than when you were working.
Those are some important examples of the paperwork you’ll need. But depending on your sources of income, you may need additional forms to get through this.
“OK, I have all of my tax forms. Now what do I do?”
Filing online is popular and easy. Effective tax software available guides you through the process by asking you questions and also does all of the calculations.
Most tax software will ‘autofill’ your forms now. The CRA will allow the software to download your T4 slips and other government forms so you don’t have to do the data entry. All you need is to sign up for a CRA online account.
There’s plenty of reputable software out there and several of them are free to use. You can find a list of certified software here.
If you prefer submitting a paper return (I can’t imagine why, but it’s an option), files and forms are available at Canada Post. The forms come with a guide book that is filled with helpful information about what is applicable to you.
“I think my situation is a bit complicated. Maybe I should go with a tax professional after all?”
It’s your call, of course. Here are some situations where it might be appropriate.
You are self-employed. Being a sole-proprietor complicates your return. A tax professional can help you better estimate your income and identify areas of deduction that you may have missed or were not aware of. Further, working with a professional also helps guide you for next year’s taxes and identify areas to help save more money.
You experienced major life events. Did you recently get married? Have a child? Get divorced? Buy a house? All of these life events will impact your annual tax return.
You simply don’t have time. Even if your taxes are pretty straightforward you might not have the time to dedicate to filing them on your own.
In situations like these, approaching an accountant or going through a tax professional can be a great way to get a better handle on your situation if you’re not able to put in the time to learn it yourself.
Regardless of how you go about filing, take the time to think about your situation and what option works best for you. If you keep all your tax documents and supporting materials, you will find that the process of doing your own tax return is not as complicated or intimidating as you once thought.
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