DIY vs. Accountant: Should You File Your Own Canadian Tax Return?
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.
How Complex Are Your Taxes?
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 via an interview.
Check out my article that lays out a detailed checklist of everything you need to prepare for your taxes.
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.
Self Employed/Small Business Owners (Unincorporated)
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 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.
Interested in doing it yourself, but want some guidance? Check out my course “Self Employed Tax Return Made Simple” which walks you through the process, step by step.
Incorporated Businesses
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.
Why I (Often) Recommend the DIY Path
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 :)
