Taxes made easier

Zoomer | March 1st, 2010

Most people would rather undergo a root canal than prepare an income tax return despite the fact the majority of filers get refunds. That explains why roughly half of all Canadian taxpayers get someone else to do their return for them, either a tax professional or a friend/relative.

I’ve never thought this was a good idea for one simple reason: no one else cares as much about your money as you do. An additional concern is that some tax preparers who work out of storefront operations may have only minimal training so while they can handle basic returns without difficulty they may encounter problems with complex situations.

Taking the time to do it yourself may be a nuisance but it can pay off with big savings that someone else may miss. Using tax preparation software makes the job easier and the Canada Revenue Agency (CRA) now offers a wide range of on-line tools that can help you through the often complex tax maze.

Some of these are fairly well known, such as Netfile which enables you to submit your return directly on-line if it has been prepared using CRA-certified software. Last year, 4.6 million people sent their returns in this way, about 17% of the total number of filers. If you aren’t using Netfile, you should consider doing so. (The CRA also offers Efile, which is used by tax professionals.)

Despite the advantages to electronic filing, more than 11 million taxpayers opted for the traditional paper method last year. If you were one of them, consider moving into the 21 st century with this year’s return. For starters, you don’t have to submit dozens of receipts, information slips, etc. You need to keep the information available in case the CRA asks to see it later, but that’s a lot better than making photocopies of everything and mailing it. Another advantage is certainty of delivery. You’ll get an electronic receipt when you file which provides the evidence you need that the CRA received your return. I have heard of several instances where a taxpayer sent in a return by mail only to be advised months later that the CRA had no record of it. Including two returns in the same envelope seems to increase the likelihood of this happening. As a bonus to using Netfile, if you have a refund coming it will typically be paid within eight business days.

The biggest complaint about Netfile is that software programs sometimes refuse to submit a completed return because of a perceived error or omission without explaining how to go about fixing it. I have personally had that happen to me and I know how frustrating it can be. Edie Pastuch, director of the CRA’s Business and Services Division, says this sometimes occurs because the taxpayer has purchased the wrong type of program, one that isn’t equipped to handle specific types of income. For example, she suggests that anyone with business, rental, or investment income who uses QuickTax should buy the Platinum edition or QuickTax Unincorporated. If you have income from self-employment, use QuickTax Unincorporated.

If you have the right program and you still have problems, she advises contacting the software company. In my experience, that can be almost impossible, especially with QuickTax but you can give it a try.

Sometimes your software program will clear your return for Netfile but you’ll then receive a notice from the CRA saying it could not be processed. If that happens and you don’t know what to do, call the Netfile help line at 1-800-714-7257 and read them the message that you received. They should be able to work through a fix with you.

Ms. Pastuch says the CRA welcomes any feedback about Netfile and assured me in a phone interview that they read all comments that are submitted. Send them to [email protected]. French-speaking readers may write to [email protected].

There are several other useful on-line services available on the CRA site, which can be found at www.cra-arc.gc.ca/menu-eng.html. I wasn’t aware that some of them even existed and I follow tax developments closely. Here are a few that are worth checking out.

My Account. Want to know your RRSP contribution limit for this year? Need to check on the status of your Child Tax Benefit? Interested in where your TFSA account stands? Curious about whether you owe money to the CRA or have a refund coming? You can find all this and a lot more in the My Account section of the CRA website. In fact, it’s a lot like your on-line bank account except that it contains even more information.

New features are being added all the time, says Ms. Pastuch. For the first time this year, you can view the data contained in your T4 slips issued for CPP, OAS, and EI payments. Eventually, data from all reporting slips filed with the CRA in your name will be available although there is no target date for that as yet.

You can also use this feature to input address changes, apply for child benefits, authorize a representative such as an accountant to access your information and handle transactions, file a formal objection to an assessment, and much more.

Because of the confidential nature of this information, you’ll need to obtain a Government of Canada e-pass in order to be able to access the My Account feature. You can apply on-line at www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/myccnt/menu-eng.html. Be sure you have a copy of your most recent processed tax return available.

My Business Account. This feature functions in much the same way as the My Account service except that it is designed for businesses. You can use it to obtain information on GST/HST payments, payroll deductions, previous transactions, etc. If you have more than one business account, you can transfer a credit from one to cover a debit in another. More details can be found at www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/myccnt/srvcs-eng.html.

My Payment. This feature, which was created last year, enables you to make direct on-line tax payments for everything from personal income tax to corporate payroll deductions. Unfortunately, the service is currently limited to people with accounts in four banks: Royal, Bank of Montreal, Scotiabank, and TD Canada Trust. There’s a useful Q&A feature that tells you more about it at www.cra-arc.gc.ca/esrvc-srvce/tx/mypymnt/qa-eng.html.

Payroll Deductions Online Calculator. As the owner of a small business, I find this feature extremely useful. It enables you to calculate the exact amount of payroll withholding tax due to the CRA and it’s especially valuable for special payments such as bonuses. In 2009, there were over 2.5 million visits to the Payroll Deductions Online Calculator web page. Over 13 million calculations were completed using this tool. You can find it at www.cra-arc.gc.ca/esrvc-srvce/tx/bsnss/pdoc-eng.html.

There are several other specialized on-line features on the CRA site. It’s worth a look; they could save you both time and money.

Gordon Pape’s latest book is The Ultimate TFSA Guide: Strategies for Building a Tax-Free Fortune, published by Penguin Group Canada. It can be ordered at 28% off the suggested retail price here.