Today, it takes more brains and effort to fill out the income tax form than it does to make the income.
~ Alfred E. Neuman
It’s tax time again so I thought we might look at whether it’s better to hire a professional to prepare your taxes or try to do it yourself. If you go the professional route, you can choose a chartered accountant, a retail tax preparation chain like H & R Block or Liberty Tax Service, or any of the numerous independent tax preparers out there. In general, accountants tend to charge a little more, followed by the retail outlets and then the independents. Most will charge based on the complexity of the return.
If you choose to do it yourself, you will likely want to use a tax preparation software unless you are knowledgeable enough to fill out the tax forms yourself. Most programs use an interview format that allows you to answer questions about your income and deductions and places the information in the right spots on your return. They are usually available in a desktop and online version. The type of software you choose will depend on your knowledge level and the complexity of your tax situation.
MapleMoney has done a couple of good reviews on TurboTax and UFile, two of the more popular programs for Canadians. From what I’ve heard, these programs are quite comparable and your choice may come down to personal preference, pricing, or your specific requirements.
Hiring a Professional: Pros & Cons
- A good tax professional will be well-versed on the latest tax laws as well as the best ways to present your information to the CRA. In the event of an audit, they can represent you (for a fee). Their expertise may help you optimize your financial situation so that it’s most tax efficient.
- If you are a commission sales representative or self-employed, your tax situation will be more complicated and an accountant can help you navigate the rules.
- If you’re not all that knowledgeable about taxes and you have no interest in learning more, you may be better off paying a professional to prepare your return.
- If you have neither the time nor the inclination to go through the software interview and file the return yourself, and you can afford it, you may want to leave it to the pros.
- Hiring a professional is more costly than using tax preparation software. I’ve seen pricing anywhere from $75 for an independent tax preparer to close to $1000 for a chartered accountant. It definitely pays to shop around, but if your return is more complicated, you can expect to pay more. Of course, beware of the “professional” offering rock bottom prices. Sometimes you get what you pay for, so always ask for qualifications and references.
- Even if you choose to hire a pro, you still have to do the legwork and basic bookkeeping needed to gather and organize all of your information. Even the best professional is only as good as the information you give him or her. If you hand your tax pro a shoebox full of receipts, you can expect to pay more. If your information is well-organized and complete, it will be a lot easier to get the most out of your return. At that point, however, you may start to wonder why you are paying a professional when you’ve already done a lot of the work yourself.
- When a professional does your return for you, you may feel like you’re not as in touch with your finances as you would like. This depends a lot on your personal preferences. Maybe you’d rather not be as involved, or maybe you’re a bit of a control freak (as I am) and you like to have a handle on all aspects of your finances.
- If your return is fairly straightforward, the cost of a professional may not be justified, as the software available today makes it easy for even the greenest novice to prepare and file a tax return. You can quickly and easily file over the internet. If you’re getting a tax refund, you can receive it very quickly and even have it directly deposited to your bank account.
How We’re Handling Taxes
For the past 10 years or so, we have used a chartered accountant as our tax situation was a bit more complicated. We have been paying anywhere from $400 when we first started to $500 last year (plus GST). Because of numerous job changes and various forms of compensation, this year’s return will be the most complicated ever for us. Needless to say, we’re sticking with our accountant for this year.
Having said that, this might be our final year using a professional for a while, as our income situation is a little less complicated now. (And our income is less too. :() I feel like I’ve lost touch a bit with our tax situation over the years, so I’m willing to put the effort into getting reacquainted with the tax forms. It takes quite a bit of effort to track everything already, so I may as well take the next step and do the taxes myself. I’ll let you know next year if I regret my decision!
Update: Rob Carrick says Tax Software’s Days Are Numbered. He’s referring to the desktop versions of popular programs like QuickTax. This article also gives a nice round-up of tax filing options.
How do you handle your taxes?