From the time of my first job, I did my own taxes — first, with the guidance of my parents; then later on my own.
I initially filed paper returns by mail and later joined the growing number of Canadians who use Netfile.
All that changed, however, about two years ago when my wife incorporated a business. We turned everything over to an accountant and joined the ranks of Canadian tax filers who pay somebody else to do their returns.
Electronic filing mandatory for tax preparers
As of 2013, any tax preparer paid to file more than 10 T1 individual returns or T2 corporate returns must file electronically. The preparers can be fined $25 for each T1 and $100 for each T2 if they do not file electronically.
With so many Canadians opting to use somebody else to do their taxes, here's a quick look at some things to consider when you hire a tax preparation service or an accountant:
1) Understand your circumstances
Do you have a simple return with a T4 and not many deductions, or do you have a myriad of other items to report, such as income from rental properties or a small business or estate issues? Take a good look at the qualifications of the tax preparer you are thinking of hiring and find out what kind of returns they can prepare.
"Do you feel that that person has the ability to do your return for you?" said Cleo Hamel, a senior tax analyst at H&R Block Canada.
Making sure you're comfortable with who is doing your taxes is key, she said.
2) Know what you want from the preparer
Decide if you just need someone to fill out your tax return or if you also expect to get some advanced tax planning.
"There are a lot of tax preparers out there who I would not call tax planners," said Tim Cestnick, Toronto-based author and president of the wealth management firm WaterStreet Family Offices. "They'll do a fine job at filling out the forms if you give them information, but they won't necessarily be able to save you much tax in terms of particularly creative planning."
3) Compare prices against services
Some tax preparation services have set fees that can vary according to the complexity of the return while the services of a professional accountant can cost hundreds or thousands of dollars.
A tax planner who does preparation of returns will generally cost more than someone who just does preparations, Cestnick said.
"You pay a little bit more, but you also hope to reap the benefits of tax savings because of taking that approach," he said.
Find out what is included in the fee for preparing your return. For example, does it involve year-round support if you wind up being reviewed by the CRA?
"[On] April 30, will there be somebody there if I need to ask a question?" Hamel said.
Community volunteer clinics
There is another tax preparation option for Canadians who meet certain income criteria.
Under the CRA's Community Volunteer Income Tax Program, low-income Canadians with simple tax scenarios can have their returns prepared by trained community volunteers.
To be eligible, a single person's income must not exceed $30,000; a couple's family income must not be more than $40,000; and an adult with one child can't have income higher than $35,000.
But beware, community tax clinics don't offer the option of receiving your refund up front like some discounters do.
The CRA volunteers also won't do returns for:
- Deceased persons.
- Individuals who file for bankruptcy.
- Self-employed individuals.
- Individuals who report capital gains or losses.
- Individuals who report employment expenses, business or rental income and expenses.
Some tax services offer to pay out their clients' CRA refund up front in exchange for a commission on the refund amount. This practice is known as tax discounting and is regulated under the Tax Rebate Discounting Act.
Discounters can take no more than 15 per cent on the first $300 of the refund and five per cent after that. Charging more than that is illegal, Hamel said, so taxpayers should be keenly aware of what is allowed and keep track of what they are being charged.
4) Be prepared
If this is your first time filing a tax return, call and make a preliminary appointment with your tax preparer. Ask questions, and give the preparer some information about yourself. You may find you have more information and documentation to gather before the preparers can start doing your return.
If you have filed before, look at the line items on your prior year's return to give you an idea of what you'll need this year. Most people's taxes don't change dramatically year to year, and it will give you a good review of your tax situation, Hamel said.
5) File electronically
Cestnick expects electronic filing will be mandatory for individuals soon, so he encourages people to start doing it now, if they are not doing so already.
Not only does it mean getting a faster refund, but it also starts the "three-year clock" sooner, he said.
Under the Income Tax Act, the CRA has three years from the date of your notice of assessment to audit or reassess your return, provided you haven't done anything illegal, such as tax evasion — in which case, you could be audited beyond that period.
"You start that clock ticking sooner when you electronically file because your notice of assessment comes faster," Cestnick said.
6) In the end, it's your return
If you neglect to provide a piece of information to your preparer, there may be negative consequences.
"Regardless of who does your tax return ... when you sign that tax return, you're accepting full responsibility for it, and if anything comes back to bite you in the butt, it is you, not the person who did your return for you," Hamel said.
"If you find a place that is not as reputable because you got a great price on [your return], if it does come back, you might be on the hook."