Money & Career

The best way for you to file your income taxes

©iStockphoto.com/marekuliasz Author: Canadian Living Credits: ©iStockphoto.com/marekuliasz

Money & Career

The best way for you to file your income taxes

Many Canadians procrastinate when it comes time to file their income tax returns, but it's in your best interest to get 'er done by April 30 (or June 15 for business owners). Why the rush? If you owe taxes, fines start at five percent of the balance owed to the government. Here's the good news: We have more ways to file than ever before, which should ease the burden ever so slightly.

Putting pen to paper
How it works: Pick up a 2013 tax package from Canada Post outlets or Service Canada offices. You can also print a copy from the Canada Revenue Agency (CRA) website, or request a mailed copy by phone. Enter your earnings and deductions on the appropriate lines, sign your return and mail it directly to the CRA by April 30. Don't forget to include a cheque if you owe money.

Suited to: Those without Internet access or whose returns consist solely of a T4 from their employer and perhaps an RRSP deduction.

The downside: Paper appears to be on the way out. Last year, the CRA received 76 percent of tax returns electronically. You'll need to submit most of your supporting documents along with the forms, increasing the amount of postage you'll pay. Using the paper method means it could take you up to eight weeks to hear back from the CRA, says Frank DiPietro, a chartered accountant and director of tax and estate planning for Mackenzie Financial in Toronto.

NETFILE
How it works: Commercial tax software allows you to file your return directly through the CRA website. The software (visit cra-arc.gc.ca for a list of approved programs) does all the calculations, so there's less chance of mathematical error. "Look for software that also provides telephone or online support to help you with the answers to your questions," suggests Evelyn Jacks, a Winnipeg-based tax guru and author of Jacks on Tax.

You don't provide supporting documentation when you NETFILE, but store receipts at home in case the CRA requests them at a later date. You'll receive a refund faster than with a paper return—generally, within two weeks. If you include direct depositinformation, the turnaround time can be as quick as eight days, says
DiPietro.

Suited to:
The do-it-yourselfer who isn't intimidated by numbers.

The downside: Unless you're a low-income earner, you'll have to pay for the software—around $20 for simple filings and up to $100 for more complex returns. Some filers aren't eligible to submit electronically. Check the CRA website for exclusions.

EFILE
How it works: EFILE is an automated service that permits tax professionals and accountants to electronically file a return on your behalf. Starting this year, all preparers who file 10 or more returns must use this method.

Suited to: The self-employed, those who have significant rental or investment income, and those who don't have the time or inclination to file their own taxes. "A tax preparer can help you file through what you can and cannot expense, and in what year versus over a number of years," says DiPietro.

The downside: This option costs the most money. Depending on the complexity of your return and whom you hire, you're looking at spending anywhere from $70 to $200 for personal tax preparation services, or more if you're filing on behalf of a business.

Check out our smart family's guide to money for more helpful financial advice.
                                           
This story was originally titled "Less Taxing" in the April 2014 issue.
           
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The best way for you to file your income taxes

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