The tax man cometh… and cometh and cometh

Every April countless Canadians, particularly seniors, find themselves wondering whether they should do their own tax return or have someone do it for them. My advice? Do it yourself if your affairs aren’t too complex and you don’t mind spending a few hours figuring out the instructional material available free from Revenue Canada. It’s important to distinguish between this printed material, which is generally good for routine tax situations, and the verbal advice you’re likely to get if you phone Revenue Canada or visit their offices — the latter is very hit and miss. While some government employees are knowledgeable and helpful, others aren’t so good (Revenue Canada employs many temporary staff during the spring rush, often with limited training). There’s a lot of room for misunderstanding if you don’t know exactly what to ask.

If your tax affairs are straightforward, answers are usually easy to get. But when unusual or obscure issues arise, it’s better to check a few different sources or seek a professional opinion. Remember, many tax issues aren’t clear-cut. The tax system is very complex, as are some people’s affairs, and often there’s no simple answer — and a Revenue Cada employee will usually decide these kinds of situations in the government’s favour.

The main advantage in doing your own tax return is you can use the exercise to review your financial affairs in detail and hopefully improve the way you manage them. While you can always get personal tax and financial planning advice, there’s no substitute for understanding your own finances and trying to implement improvements year round. Let’s face it — no one else has quite the same incentive to do this as you.

The main disadvantage in doing your own tax return? It’s impossible to know every legal tax saving opportunity yourself, and there’s a chance you’ll forget or miss something that should be included or reported, running the risk of raising the ire of Revenue Canada.

If your tax return involves business income, income from other countries, complex capital gains situations or special tax provisions, you’re more likely to benefit from professional help than if your income is reported on a T3, T4 or T5 slip (or similar reporting forms).

If help is needed, you can have your tax return prepared by a chartered accountant or other tax professional, and ask for advice on any tax planning opportunities that come to light in the process. But remember — tax return season’s hectic for accountants, and they won’t always have time to pay attention to every detail.

Probably the greatest single risk in doing your own tax return is that you’ll be unaware of ways you could reduce your tax. Revenue Canada’s usual explanation in assessing more tax is: You’ve been assessed based on the information submitted with your return. Terribly enlightening, isn’t it? And there’s one thing you can count on — if you pay too little tax you’ll hear from Revenue Canada, but pay too much? You won’t get a refund unless you ask for it and explain why. Revenue Canada’s mission is to maximize tax collections, not to look out for your best interests. In most cases, they’ll be fair, but only if you take the initiative.

My April Taxletter for Investors deals with some of the more important issues in personal tax planning and tax return preparation this year. For a copy please send $5 to cover printing and mailing to: Donald I. Beach & Associates Inc., 2555 Highway 7, Greenwood, Ont., L0H 1H0.