So who should prepare your tax return anyway?
Ultimately, you are responsible for having your return filed with the Canada Revenue Agency no later than April 30. If you have a business that is not incorporated you have until June 15 to file a return (tax liability is still due by April 30).
You may be torn between doing your own tax return or hiring a professional.
Find the Right Accountant: You do not require a professional designation to do bookkeeping or prepare peoples tax returns. While there are some excellent individuals who are working in the industry it is important to note that there are no restrictions on who can call themselves an “accountant.” The main accounting designations are Chartered Accountant, Certified General Accountant, and Certified Management Accountant. All three of these designations required individuals to take courses and pass examinations.
Discount Options: During tax time, discount tax booths pop up all over the city. How do discount options compare to public accounting firms? And should you pay a little extra for someone that has a designation? There is nothing wrong with either. It really comes down to the complexity of your return. If your situation is straight forward then going to the place that is less expensive may be your best option, especially if you don’t need any advice. If your situation has a level of complexity,visit a public accounting firm. The old adage applies: You get what you pay for.
Do-It-Yourself: Off the shelf tax software programs are easy to navigate and ideal for individuals who have a computer and a simple return. If all you have are T4 and T5 slips then this type of return doesn’t required advanced training. If your situation is not as simple, you should find a qualified accountant. The fees paid to an accountant for tax advice are generally deductible while the cost for a personal income tax software program is not. Having a qualified accountant prepare your tax return may end up saving you taxes or the hassle of correcting an incorrectly filed return. Having peace of mind that you are minimizing tax and taking advantage of all potential benefits often exceeds the fees you will pay.
Expectations: What do you get for a discount? The person preparing your return may or may not have an accounting designation. Most discount options involve you dropping your information off and having your return prepared based on this information. Some advertise a speedy process (same day). As a finished product you may receive a summary page or complete income tax return with schedules. Public accounting firms generally have a different system that involves a little more time. Most public accountants send an annual tax letter and checklist to their prior year clients at the beginning of each tax season. This checklist assists their clients in gathering information and notifying them if their current situation has changed from the previous year. A junior person generally prepares your return and then has it reviewed by a manager.
Continuity: If you have a found a good accountant then it is best to continue that relationship. Chances are your accountant has both paper and electronic files that document your personal situation. They have a history of your past and will be in a good situation to provide proactive advice. A comparison of your previous return always helps when preparing subsequent returns.
Independence and Qualifications: Your financial advisor should not be preparing your tax return and your accountant should not be recommending individual investments to you. You should have two independent people that are qualified in their respective areas. We encourage you to review your investments with your accountant and communicate your tax situation to your investment advisor. Communication between your accountant and financial advisor is important, however, they shouldn’t be the same person.
Filing Too Early: Regardless of who completes your return, take care that you do not file too early. Information slips for T4s and T5s are not required to be mailed out until the end of February. The regulatory mailing date for T3 slips is the end of March. If you file too early and miss something then you will have to deal with Notices of Reassessments and T1 Adjustments. If you have taxable investment income we encourage you to wait until the first week of April before completing your tax return.
Filing Too Late: If you file your income tax return late, you should be aware of the interest and penalties that may result. If you do not pay your 2007 taxes on time or if there is a balance owing once you receive your 2007 Notice of Assessment, the CRA will charge compound daily interest starting May 1, 2008. The prescribed interest rate charged on overdue taxes is currently at 8 per cent but is reset every quarter. If you owe tax for 2007, and do not file your return for 2007 on time, CRA will also charge a late-filing penalty.