There’s probably never been a favourite way to pay taxes.
But given a range of choices from a centurion holding a knife to your throat as you render unto Caesar to sitting in your home office patiently clicking on a computer mouse, Canadians have embraced option B.
As of Jan. 11, 2009, more than half of the 26.2 million returns filed with the Canada Revenue Agency for the last full tax year were delivered electronically. And according to the Conference Board, about 40 per cent of households plan to file their taxes online this year, up from less than 34 per cent four years ago
It's not hard to see why the electronic option is becoming more popular. It's fast, secure, more accurate, and refunds can take as little as eight business days with direct deposit. You can wait as long as six weeks to get a refund from a paper filing.
Why no CRA software?
According to the CRA’s website, "the development, distribution, and the subsequent ongoing maintenance of free tax software would represent a tremendous expenditure and require a continuous support network to assist users."
2) Cranky users
"Regardless of our efforts to provide free software, some Canadians will always prefer to purchase products from the private sector market, as many of these products offer tax-planning tools and are often compatible with home accounting software." CRA says.
Source: Canada Revenue Agency
Many people who file their returns electronically use the Canada Revenue Agency's Netfile system. This is the web-based service that allows taxpayers to be their own accountants and file their returns themselves over the internet. (Efile is the internet-based filing system used by those who prepare tax returns for a living). The much-less popular Telefile option lets those with relatively simple returns file by phone using an interactive computer program.
Plus, the CRA also suggests these electronic tools are more environmentally friendly because they use less paper. (Well, maybe a little less. You must still save all your receipts and other paperwork for six years. And unless you’re running off a windmill or solar panels, chances are your computer leaves a small carbon footprint.)
How to Netfile
You'll need an access code to Netfile your taxes. You can find that on the label sheet of your T1 personal income tax return package. Or you can go online and enter some key data. (You'll need last year's tax return handy.) Unfortunately, if you've never filed a tax return before, you won't be able to Netfile.
Once you have the access code, all you need now is a "certified" tax program. The CRA has a list of certified programs on its website.
The Netfile service is open from February 9, 2009, until September 30, 2009, for the filing of your 2008 return.
How we filed in 2008
- Paper: 10.69 million (44.97%)
- Netfile: 4.3 million (16.4%)
- Efile: 9.61 million (36.6%)
- Telefile: 493,261 (1.82%)
Source: Canada Revenue Agency
At this point, taxpayers have two main options: using software that is loaded onto the computer's hard drive or using interactive web-based programs.
Some programs can be bought in a store and come on a CD that installs the software on your hard drive. Others allow users to download the software directly from the company so you don't even have to head to a store. Some programs offer both versions.
Often, these programs allow you to prepare multiple returns but are more expensive than the web-based tax programs where users interactively prepare their returns online without downloading the software onto their computers. For security reasons, the CRA says no more than 20 returns may be filed through any single program that uses Netfile.
Here's a quick look at the particular bells and whistles of some of the most popular tax-preparation programs certified for Netfiling:
Tax software programs
Intuit's QuickTax is the most popular tax preparation software in Canada. (Just type the names of any of its competitors in the Google search window and see what comes up first.) The Basic edition costs $19.99 for eight returns and is for those with simple taxes to file. The Standard edition costs $39.99 for 8 returns and is suitable for those who have RRSPs or medical expenses to claim. The $69.99 Platinum version adds features for those with rental or investment income to report. And the $99.99 Unincorporated Edition is mainly for those with business taxes to file and imports data from Quicken.
An on-line version is available for Macintosh users.
This year, Intuit guarantees that if another software package calculates that you should get a bigger refund, Intuit will give you your money back. That said, it’s hard to imagine even the most determined taxpayer filing multiple times on multiple versions of software.
Ufile for Windows
Like QuickTax, Ufile uses the interview method to lead users through the tax-preparation process. Ufile can be downloaded for $29.99 and allows users to prepare as many as eight returns. It can also handle self-employment income, including income from rental properties. Its maker says it can be run on a Mac, if you have the Windows environment installed.
Deadline for 2008 returns:
- Midnight, Thursday, April 30, 2009
- Penalty for filing late: 5% of tax owing, plus 1% per month
Source: Canada Revenue Agency
TaxTron Mac or Windows
TaxTron uses a "step-by-step" approach and can be bought at several national chains or downloaded from the company's online store. For those who like to fill out tax returns for "fun," a free version is available, but it doesn’t allow you to print or Efile the finished return. Upgrade for $12.99 to the individual licence version and file one return for a taxpayer with a net income over $30,000 and 19 returns for income under $30,000. A family licence will allow you to prepare and file five returns for earners with a net income over $30,000 and 15 returns for earners with income under $30,000.
For those with Macs, the cost is $19.99 for a single license and $39.99 for a family.
Lesser-known downloadable programs include:
- GenuTax, which costs $34.99 for unlimited returns and advertises that all annual updates in future years will be free.
- StudioTax 2008, which is free but asks for voluntary contributions (can't be used by Quebec filers, but claims 100,000 Canadians used the software last year).
- myTaxExpress, which costs $6.99 for one return and $13.99 for up to 10 returns.
- TaxFreeway, which costs $9.95 for unlimited returns (the version for Macs is $14.95). It says it’s the only Canadian tax software allows user to work in interview and form modes simultaneously).
- FutureTax, which cost $5.99 for one return, $7.99 for two and $9.99 for 10 and $15.99 for 20.
- eTaxCanada. There’s no price structure year for the 2008 tax year, but the 2007 package cost $8.99 for one return, $15.99 for two returns and $24.99 for 20 returns (free for those with net incomes below $25,000).
- UdoTaxes is still waiting for approval from the CRA, but says users may generate up to 20 returns for $6.99.
An internal analysis by the Canada Revenue Agency found that individuals who sent their tax returns through the internet were more likely to understate the amount of taxes owed.
The "program analysis estimates the non-compliance rate to be higher on Netfile returns vs. the other filing methods," says an internal report from September 2007.
The department estimated about 15 per cent of returns were non-compliant. That translated to about $569 million in taxes owed but not declared.
— Canadian Press, Aug. 11,2008
Web-based programs (for Windows or Macintosh)
There are a couple of advantages to using web-based programs. First, you can prepare your taxes anytime and anywhere there is an internet connection. Second, you typically pay only when you print or file.
The online version of QuickTax Standard dropped in price by $5.00 to $14.99 this year.
But the company offers a free version for taxpayers with simple taxes to file. And they mean simple: no RRSPs, no investment income, no charitable donations and no pension or income from tips.
Ufile's online solution costs $15.95 for the first family member and $24.95 for two family members. Each additional family member is free, as are returns for those with a family income below $20,000.
H&R Block Online
The tax preparation firm H&R Block has an online version for those who want to do their own return. H&R Block Online costs $19.95 for one return and a flat $10 for extra family members.
There are other web-based programs out there that can work out to be cheaper than the big firms above. But some cannot be used by those filing returns in Quebec. Here's a list:
- AceTax Online costs $8.99 for one return, $11.99 for a couple (but takes $2 off for returning customers). It's free when total family income is below $25,000.
- WebTax4U.ca costs $12.99 for the first return and $5.99 for each additional family member. It's free for households where total income is below $20,000.
- CuteTax Online costs $9.98 for one return, $15.98 for two returns and $19.98 for three to five returns. It's free for singles with incomes below $25,000 and couples with incomes below $30,000.
- MBOTax costs $9.95 per return but is free for those with incomes below $25,000.
- EachTax.com costs $8.99 for the first return and $3.99 for each additional return. Repeat customers get a five per cent discount.
- Taxnic charges filers $7.99 for the first return, $5.99 for each additional return and, again, is free to those with incomes less than $20,000.
You can still file the old-fashioned way — by hand, on paper, via Canada Post. You can download all the forms you need from the Canada Revenue Agency's website or pick up a tax package at a Canada Revenue Agency service kiosk or at the post office.