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 :)
Articles from the Blog
What Unincorporated Small Business Owners Need to Know about Filing Their Taxes
Being a small business owner comes with challenges, not the least of which is doing your taxes. While most Canadian taxpayers have relatively simple tax returns that can easily be completed using
Why Every Canadian Should File a Personal Tax Return
A friend of mine has been in a nightmare scenario with CRA. She hadn’t filed her tax return in a few years mostly because she had one T4, figured that she didn’t owe any tax and was simply procrastina
Small Business Stuff:
Follow Me on Twitter/X to see regular posts about small business, finance and tax. Also feel free to ask me questions directly on the platform.
25% of Business Missed the CEBA deadline which means 75% of businesses did repay the loan. However according to Dan Kelly of CFIB it hides the fact that a huge number of those that repaid their CEBA loans did so by borrowing the money to do so
10 Small Business Grants for Canadians: A list of grants that might apply to your business including a couple for hiring and adoption of digital technologies.
Tax Stuff:
Key Tax Changes for 2024 including higher CPP and EI contributions, carbon tax changes and the digital services tax
What are GICs and are they Taxable: Further to questions that I’ve received about GICs, this is a useful article on what they are and tax consequences. Given current high interest rates, I recommend investing in GICs that you can include in your TFSA,RRSP or non registered accounts.
QuickBooks Tutorials:
My latest Tutorial on how to create an opening balance journal entry in QuickBooks Online which is useful when transferring balances from an existing software or a spreadsheet.
QBO Opening Balances Journal Entry
My YouTube channel continues to be a work in progress. For now, all my videos relate to QuickBooks and how to use specific features.
If you think it is useful and relevant to you, please subscribe to the channel.
If you have any questions about QuickBooks/Xero/Excel or finance in general for which you would like to see a video, please either leave them in the comments section of any of the videos (I see them all) OR email me directly at ronika@montrealfinancial.ca
Other QBO videos can be found at my channel here
Free Tools and Resources
Small Business Books
Enjoy 15% Off with code SPECIAL
The Essentials For Starting Your Small Business Corporation
CA$24.99
A Comprehensive Guide to Working with QuickBooks Online
CA$24.99
A Straightforward Tax Guide For Canadian Small Business Owners
CA$19.98
Everything Canadian Business Owners Need to Know about Dividends and How to Pay Themselves
CA$19.97
Everything You Need to Know About Starting Your Sole Proprietorship
CA$14.99
Consultation Services
I also provide one on one paid consultation services where I can answer your specific questions relating to your small business and/or personal finances. To find out more click here or on the “book a consultation” link below:
Note that I no longer provide ongoing accounting or tax preparation services.
Reviews/Feedback
I would love to hear your comments on my current blog posts, topic ideas for new blogs, book feedback or anything else that you want to talk to me about. You can use my feedback form or email me directly at ronika@montrealfinancial.ca.
For anyone who has purchased my books through Amazon or directly through my website and found them useful, I would deeply appreciate a review on Amazon.
Finally, if you think anyone would benefit from this newsletter, you can send them to my subscribe link.
Hope everyone is enjoying the vicissitudes of weather that is January :)
Ronika