If you have ever struggled through tax preparation the old-fashioned way, with pencil and paper, the appeal of tax preparation software should be obvious. No thinking back on that Grade Five math as calculations are done automatically and most programs prompt you on less obvious aspects of your tax filing.
One new application even gets you started by taking a picture of your T-4 with your smartphone.
But even as tax software becomes more powerful and easy to use each year, the question remains: Are there times when you should call in a professional?
Yes, it turns out.
Four accountants contacted on the subject said that while powering up a tax preparation program is preferable to figuring it out yourself (for most of us), some finances are too complicated for do-it-yourselfers.
Those who should consider spending a few hundred bucks to get a professional to prepare a return include those who run their own business, have rental properties or foreign sources of income such as offshore investments.
“People who have self-employment income, commission income, rental income, investment income, I think those people do need accountants,” said Mark Goodfield, a chartered accountant with Toronto’s Cunningham LLP and author of The Blunt Bean Counter blog.
Software makes the filing process easier but does not protect users with complicated finances from making mistakes, he said. “If it is ‘garbage in, garbage out,’ you are missing it. The advantage of having an accountant is that they understand what you are putting in and what you can claim and what you are missing.
“The problem I find with people who do use the software is it is not going to be technically wrong, but it is not necessarily going to give you the best result.”
Mr. Goodfield often encounters clients who used tax software and produced less than stellar results. “Rental income is a huge issue. People do things wrong. When we get clients who have done it themselves in prior years, we often make what we call T1 adjustments to fix up things they have done wrong.”
Tax preparation software fills a vital function for those with straightforward finances, says Marilyn Benninger, a Burlington, Ont.-based certified general accountant who consults to the information technology industry.
“I don’t think people should be doing them by hand. You are going to miss something or you are going to make a math mistake. To the degree that the softwares are very approachable and easy to use and they try to assist you, I think everybody should be using tax software.”
Ms. Benninger recommends that tax filers consider the Canadian-produced UFile software as well as Intuit’s TurboTax, which is by far the most popular tax preparation software. (Intuit said five million Canadians filed their taxes using TurboTax last tax season.) “Both of them have excellent help resources,” she said.
Dean Paley, a certified general accountant and certified financial planner who blogs at taxresource.ca, recommends a third, little known filing software called StudioTax.
“For a basic return it is fine software and it is absolutely free,” he said. “The other ones out there like the TurboTax and the UFiles, they are all great programs as well. They will help you maximize your RRSP deductions and credits, those basic functions.”
According to its website, the CRA-approved software program was created by a group of Ottawa-area software development professionals. The bilingual program is distributed using a free licensing model and the people behind it request a “modest monetary contribution” for those who find it “useful.”
Software providers such as Edmonton-based Intuit Canada say that filers can calculate and file their taxes in about 30 minutes. Intuit tax specialist Caroline Corbeil noted that her company makes tweaks to its flagship TurboTax product every year beyond the necessary changes to keep pace with Ottawa’s modifications to tax law.
Intuit’s latest product, called SnapTax, allows iPhone users to start filing by taking a picture of their T-4.
“You just have to enter very minor information and you can do your tax return by taking a picture,” she said. There are some limitations. It is not ready for other smartphones such as the BlackBerry and is geared toward people with ultra-simple returns (just T-4 slips, under the age of 65 and with no children or dependants).
When should you hire an accountant? Robert Gore, owner of a Toronto accounting firm, recommends that people see a professional every five years or so. “The key benefit of dealing with an accountant is you can get planning advice on what you can do and what you shouldn’t do and how to plan things.”
Mr. Gore has found that many of his clients simply can’t be bothered to do their own taxes. “We have fairly high-income clients whose returns are not that complicated who just go, ‘You know what, it is just not worth my time.’”