DIY Tax-filing Vs Using a CPA/Tax Expert In Canada

Taxes are unavoidable, so if you are wondering whether to use a CPA or do it yourself, there are pros and cons to consider.

Canada has some great free options for people who want to prepare their own taxes, but like anything that is free, the level of service and support you will receive drops compared to platforms that cost you money.

Some people choose to use a CPA or tax expert, but this is an expensive route when you compare it to doing your own taxes.

Regardless of your decision this year, it is worth considering all your options for tax preparation. As your financial circumstances change, you should keep tax professionals in mind.

Let’s look at some of the pros and cons of filing your own taxes, and also some of the free platforms that can help you save money when tax season rolls around.

Going DIY – Know Your Financial Circumstances

One of the biggest things that should influence your decision to either prepare your own taxes, or hire a professional, is how complex your tax situation is, or if your financial circumstances have changed during the past year.

If you started your own company, changed jobs, or got married, it might be a good idea to spring for the help of a tax professional or CPA.

On the other hand, if you are single, have a steady job with taxes deducted at source, and you haven’t done anything else that is considered a taxable event, there is no point in paying for a CPA or even a premium tax preparation platform. 

There are a number of totally free software platforms, approved by the Canada Revenue Agency (CRA) for use with its NETFILE program, that make filing your taxes simple, and free of charge.

Some of these platforms will actually help people who have more complex financial situations as well, but more on that below.

Ok…So Why Should I Use a Canadian CPA?

It is a good idea to use a Canadian CPA if you need to file taxes that are somewhat more complex than normal, or your financial life changed in the last year.

If you have investments that generate capital gains, then it is probably a very good idea to consult with a tax professional, as the consequences of missing taxable income can be unpleasant.

And in addition to helping you avoid penalties and additional audits in the future, a tax professional will be able to spot tax deductions and credits that a software might miss, and offer you tax planning advice.

A tax software may help you calculate what you owe the CRA, but it won’t help you with tax planning and designing more tax-efficient structures or strategies to minimize taxable income.

There is a big difference between tax fraud and tax planning, and a skilled tax professional will be able to help you spot areas where some tax planning could help you save money in the future.

So in summary, here are some pros and cons of going DIY versus using a tax professional

Pros:

  • Save money by using one of the free or cheap option. Going with a CPA will no doubt cost you way more than filing yourself.
  • Gain more insight into your financial picture. Tax time is an opportunity for you to go through your finances, with your partner if married, see what is going well and discuss the areas that can be improved. It is difficult, but not impossible, to have this conversation when a professional handle your taxes.

Cons:

  • Filing your own taxes can be time consuming. This is especially true for people with complicated tax circumstances. Not only will you need to spend some time getting all the documents ready, you may also need to research/read on some specific tax areas.
  • Risk of error is higher. The more complicated your taxes, the higher the risk that you’ll make an error that may come back to haunt you.

So how do you decide on which option is right for you?

  1. Consider how complicated your situation is. This is perhaps the most important factor to consider in choosing to file yourself or using a professional. If you only get employment income from a job, then going DIY may be a perfect option. On the other hand, if you get T4 from a job, hold many investments, have self-employment income, separated and paying alimony etc then you may need to consult a professional.
  2. Do you have any major changes in the past year? Major changes could be marriage, having a baby, buying a house, moving to start a new job etc. some of these changes may have a tax impact and you will need to research them to find out. A tax professional will help you navigate the changes and know the deductions you can claim where applicable.
  3. Cost: The more complicated your taxes, the more it will cost you. So if your taxes are not complicated and cost is an issue, then you can get to file for free. On the higher end, using a CPA may set you back a few hundreds.

Free Tax Filing Software in Canada

These are the top free tax software available for Canadians

  1. TurboTax
  2. Wealthsimple Tax (formerly Simpletax)
  3. H&R Block
  4. CloudTax
  5. StudioTax
  6. GenuTax
  7. AdvTax

To learn about the features of the tax software and how they compare, check out the post below:

Related Post: 8 Best Free Tax Software In Canada

Conclusion

The right option for you depends on your individual circumstances so you need to consider your situation before you decide on the route to go. We all have that friend or family member that does everything himself. This may be working out for him but may not work so well for you.

So whichever option you choose to go with, there are many resources available for you these days, so keep learning.

Related Post: Ways to reduce your taxes in Canada

Simon is a CPA by day and a Personal Finance Blogger by night. With over a decade experience in financial services, he's passionate about personal finance, investing and helping people take control of their financial life.

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