Every year all Canadian residents have to put some time aside to prepare their taxes. For somebody who lives in Canada for many years, it is no longer a question, “how hard to file your taxes in Canada?” they already did it several times. But for somebody who never did it before and not familiar with the Canadian tax system (e.g., new immigrants or recent college graduates), it may be a challenge. On the other hand, even if you did it a dozen times, but your tax situation changed, for example, you opened a new business, got into real estate investment, or divorced, filing the tax return will be more complicated than before. Professional advice will make a big difference.
What options do you have when filing taxes:
When filing your taxes, you have many options. You can do it yourself, which will allow you to save on accounting services, but you will spend your valuable time. At the same time, you can hire a professional who can spend his time but will charge you a fee for his services. My advice, if you can afford an accountant, go for it.
Preparing your tax return yourself:
Preparing your tax return yourself may be a good option when you have a straightforward tax return, where you do not have any income or have just employment income in T4 slips. There is software available which does not cost much or even free, and it will guide you through the process and also file your tax return to CRA.
Paid personal tax software options:
When we look into paid options, you can choose Turbotax or UFile. Both will cost you around $20 for the simple tax return. The software is continually improving, getting all the updates as soon as tax law changed and trusted by thousands of Canadians. The process is usually straightforward and will navigate you from one step to another, where you have to answer questions and indicate your earnings. In the end, you will see if you have to pay taxes or get a refund and see the balance. The last step is to send your tax return to CRA, which software will do for you.
The free software options:
Both TurboTax and UFile have free online versions, but you can also look into SimpleTax, which is entirely free tax software. The paid version of Turbotax and UFile has the same process as the paid version, just with many limitations, and unless you have no income or only T4, we can’t recommend these versions.
On the other hand, the 3rd option, SimpleTax, is quite good and provides you with better options beyond T4 income, it does not have any limitations on your income. The software has a simple interface and easy to use from your browser. After you file your return, you can donate to the developers of software to keep this project alive.
The better option to file your tax return:
When you have a small business, sole proprietorship, investment income, or foreign income, the tax process becomes more complex, and preparing taxes by yourself no longer makes sense unless you have an accounting background. And while you still can do a tax return using software, it is a big chance you will make some mistakes, which results in paying more taxes or even triggering a CRA audit.
If you want to hire somebody, you have a couple of options. The first is to use a free tax clinic. But free tax clinics available only for low-income families. For example, for a two-person family, your total income should be less than $45,000. Second is hire somebody who has experience with complex tax returns.
Professional accountant – your best option for preparing a tax return.
The best option is to contact a professional accountant who specialized in taxes and knows what she is doing. Such professionals usually have an accounting background and years of experience. She can look into various options to minimize your taxes; she knows what types of business expenses are tax-deductible or not; she can suggest what is better to claim in business other than a personal tax return.
A good accountant is usually worth much more than you pay her. You need to understand that the accountants’ fee is not your liability but your asset. In many cases, just the right advice or correct structuring of your business allows you to save $5,000 – $10,000 per year on taxes for small business owners. And at the same time, the accountant usually costs you much less, just around $1500-2500 per year if you are a business owner or around $150-300 for the personal tax return, so the savings are substantial.
At the end of the day, it is your choice if you are going to file your tax return yourself or hire an accountant. The least you can do is to talk with a professional who understands all the complexity of the Canadian tax system and can give you a bit of advice. You can speak with one of our professionals at Taxory, and our first phone consultation is free of charge.
Anna Grigoryan is a public accountant who provides accounting, bookkeeping and tax services to Small Business owners and individuals. She has more than ten years of professional experience in public accounting and a bachelor’s degree in Business Accounting. Anna is the founder and CEO of Taxory, an accounting firm located in Ontario, Canada.