It's that time of year to give it up for the Canada Revenue Agency. The annual tax filing ritual will unite more than 26 million of us in the mad scramble to confess all things financial by the deadline (which will actually be Monday, May 2 this year, because April 30 falls on a Saturday).
Ask Canadians to name their favourite way of filing their taxes, and you'll get a lot of strange looks. After all, few people really enjoy filing their taxes. But these days, it's a lot easier (fun would be a stretch), thanks to the same kind of technology you're using to read this — the computer.
More than 60 per cent of all tax returns are now delivered electronically to the tax department — a percentage that has seen steady growth every year since Efiling and Netfiling began.
|How we filed in 2010|
|Paper: 10,747,649 (39.99%)|
|Netfile: 4,950,327 (18.42%)|
|Efile: 10,776,023 (40.10%)|
|Telefile: 401,297 (1.49%)|
|Total: 26,875,296 (100.00%)|
|Source: Canada Revenue Agency|
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.
A variety of tax software programs are once again available for Canadians doing their taxes electronically. Most cost money, but some are free for those with modest incomes. A few are offered free to everybody.
Many people who file their returns electronically use the CRA's Netfile system.
|Number of returns Netfiled in 1999 (the first year of availability): 530|
|Source: Statistics Canada|
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 professionals 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 program.
The CRA suggests these electronic tools are more environmentally friendly because they use less paper. (Well, maybe a little less. Most people who Netfile likely still print a copy of their returns for their own records.)
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. This list is updated through March as more programs satisfy the certification requrements.
The Netfile service is open from Feb. 14, 2011, to Sept. 30, 2011, for the filing of 2010 returns. 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-ROM 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:
TurboTax is the new name for QuickTax, Intuit's popular tax-preparation software. The Basic edition costs $19.99 for eight returns and is for those with simple returns to file — in other words, those with just T4 slips and charitable donations. The Standard edition costs $39.99 for eight returns and is suitable for those who have RRSPs or medical expenses to claim. The $69.99 Premier version adds features for those with rental or investment income to report. The $99.99 Home and Business edition is mainly for those with business taxes to file. All versions allow users to import data from Quicken, financial management software also made by Intuit. All of the CD-ROM/downloadable versions are for PCs only. If you have a Mac, you'll need an online version (see below).
|Deadline for filing 2010 personal tax returns: Midnight, Monday, May 2, 2011.|
|Penalty for filing late: 5% of tax owing, plus 1% per month.|
|Source: Canada Revenue Agency|
Like TurboTax, UFile uses the interview method to lead users through the tax-preparation process. Canadian-owned UFile can be installed on your computer (either downloaded or with a CD-ROM) for a suggested retail price of $29.99 (some stores sell it for $19.99) and allows users to prepare as many as eight returns. It can handle self-employment income, including income from rental properties.
H&R Block at Home deluxe tax software allows you to prepare up to 16 tax returns for $34.99 (but the company is offering a $5 discount until Feb. 28, 2011). Like its main competitors, it employs the question-and-answer format and allows you to import your tax data from other software products.
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 file 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 licence and $39.99 for a family.
Other downloadable programs that are (or are expected to be) CRA-certified include:
- GenuTax Standard : (Netfile certification pending.) Costs $39.99 for up to 20 returns and advertises that all annual updates in future years will be free.
- FutureTax 2010 : A downloadable program that charges $5.99 for one return, $7.99 for two returns, $9.99 for 10 returns and $15.99 for 20 returns. It's free for those with net incomes below $25,000. It can't be used to file Quebec provincial returns. For Windows and Linux only. Not available for Macs.
- myTaxExpress: Costs $6.99 for one return and $13.99 for a license that allows users to prepare up to 10 returns. It's free for total incomes below $25,000. It also can't be used to file Quebec provincial returns. For Windows or Linux only. Not available for Macs.
- TaxFreeway: Costs $9.95 for up to 20 returns (the version for Macs is $14.95). This year, it also offers a "3-in-1" package for $19.95 that allows users to file up to 20 returns using PCs, Macs or an iPad. It says it's the only Canadian tax software that allows users to work in interview and form modes simultaneously.
- StudioTax 2010 : (Netfile certification pending.) The work of BHOK IT Consulting, a group of software professionals in the Ottawa area. It's free to download and use regardless of income but asks for contributions. If you want a CD-ROM version, the company asks for $10 to cover manufacturing and shipping costs. One caveat: it can't be used to file Quebec provincial returns, and it's Windows only. StudioTax claims "hundreds of thousands" use its free service.
- UdoTaxes: From Eightside Software Consulting of Port Coquitlam, B.C. Also advertises "no-charge" for its downloadable tax software — up to 20 returns free for all users regardless of income (although it does ask for contributions). The only exclusions of note are that Quebec residents can't use it to file their provincial return, and it's for Windows systems only.
- Taxnic for Windows: (Netfile certification pending.) This downloadable program charges $9.99 for the first user, another $5 for each of the second and third returns and is free for additional returns. For singles with total income below $20,000 and couples with total income below $25,000, it's free.
- eTaxCanada 2010: (Netfile certification pending.) For Windows only. Costs $8.99 per person. A five-return licence costs $24.99. It's free for students or those with net incomes below $25,000.
Web-based programs (for PC or Macintosh)
There are several advantages to using web-based programs. First, you can prepare your taxes anytime anywhere there is an internet connection. Second, you typically pay only when you print or file. lastly, they're often cheaper than their corresponding CD-ROM or downloadable versions.
The online version of TurboTax Standard is $16.99 for a single return, which will suffice for typical taxpayers with the usual claims like RRSP deductions, charitable donations and medical expenses. 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. There's also a free version for students with gross incomes below $20,000. A Premier edition for those with investment or rental property income is $29.99 for a single return. Additonal returns are $16.99.
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 total family income below $20,000.
H&R Block has an online version for those who want to do their own return. H&R Block Online charges $15.95 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 who need to file Quebec provincial returns. Here's a list:
- AceTax Online: (Netfile certification pending.) From FredSoft Technologies. 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.
- TaxChopper: (Formerly 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.
- EachTax.com: Costs $5.99 for the first return (down $2 from last year) and $3.99 for each additional return. It's advertising that new customers can file for free this year, regardless of income.
- WebTax4U.ca: From MacroNT Inc. costs $12.99 for the first return and $5.99 for each additional family member. It's free for those with total family incomes below $20,000.
- Taxnic Online 2010 : (Netfile certification pending.) This online program charges $9.99 for the first user, $5 for the second returns and $19.99 three to 20 returns. Free for singles with total income below $20,000 and couples with total income below $25,000.
- eTaxCanada 2010 : (Netfile certification pending.) Costs $11.99 for one return, $19.99 for a couple. It's free for students or those with net incomes below $25,000.
- MBOTax 2010: (Netfile certification pending.) Costs $9.95 for the first return and is free for those with net incomes under $25,000.
- FileTaxOnline.ca: (Netfile certification pending.) First appeared last year. It costs $9.98 for an individual return and $15.98 for a family return. It's not available for filing Quebec provincial returns.
Finally, time for a quick mention of TaxMan — the work of an opinionated Victoria man who calls himself "the poor man's accountant." His offering is a "moron-proof" 28,000-line tax software program that uses CRA-approved forms. You can't Netfile this baby — you'll have to print it up and mail it in — but it is free, regardless of the number of returns or income. This year, TaxMan is also accepting donations, for those who feel so inclined.
Of course, everyone who uses tax software can always file the old-fashioned way — on paper, via Canada Post. You just do your data entry through the program and then print the results and send them in.
You can also download all the forms you need from the Canada Revenue Agency's website or pick up a tax package at a CRA service kiosk or at the post office and fill everything out (shudder) by hand.
But fewer of us are choosing to file paper returns. The era of the electronic tax return has clearly arrived.