Should You DIY Your Taxes?
Hello All,
As tax season approaches, a question that I get often is whether you should do your own taxes or outsource them to a tax preparer or accountant. My answer, perhaps unsurprisingly, is that it depends.
The first and perhaps most important factor is to determine the level of complexity you are dealing with. If your situation is simple e.g. you have a T4 slip from your employer, RRSPs and a couple of donations, it is quite easy to do it yourself especially using tax software which guides you through the process. However, if you have sold a principal residence or rental property, or have an active investment portfolio or another arcane tax event , and you are unsure of how to deal with this, it might make more sense to outsource so that you are not doubting whether you have done it correctly.
If you are an unincorporated small business owner/self employed/freelancer etc, you have a to complete a form referred to as the T2125, that requires some information about the business, total sales and expenses by category. There are also special sections on the T2125 schedule that have to be completed that include CRA deductible car expenses, large purchases such as computer and furniture and home office expenses. My advice in this case is to determine how comfortable you are with numbers. Often, if you do your own accounting it isn’t a huge leap to do your own tax return. And again tax software greatly simplifies the process by taking you through an interview and informing you of errors along the way. Of course, if the thought of doing the tax return on your own causes you an undue amount of stress, I recommend using a tax preparer or accountant.
Note if you are an incorporated business owner, while I do recommend an accountant for the corporation, you can still do your personal taxes on your own as in many cases you might only have a T4 or T5 (dividend slip) and a handful of other tax items.
If you are on the fence, it might make sense to try it on your own (most tax software is free until you file your tax return) and assess your level of comfort. If you are still unsure, you can outsource and compare the results to the tax return that you did via software to identify differences and see if you were on the right track.
The primary reason I recommend doing it yourself (to the chagrin of many accountants) is to gain a better understanding of a significant component of your finances. Knowing how your taxes work is deeply empowering and gives you a sense of accomplishment. And of course it doesn’t hurt to save a bit of money that might be better used to reward yourself for doing your own taxes :)
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Hope everyone is enjoying the vicissitudes of weather that is January :)
Ronika
