Half of Canadians either complete their own taxes or collaborate with a
family member to file their returns. Only 41% engage the services of an
accountant.
This data comes from a new survey commissioned by UFile, a Canadian company
that makes personal tax-preparation software, in conjunction with Decima
Research, which recently polled more than 1,000 Canadians on their tax-filing
habits.
According to the Canada Revenue Agency, nearly half of all returns filed in
2005 were submitted on paper, as opposed to being filed electronically over the
Internet or by telephone. This represents approximately 11.6 million paper
returns. Of these, roughly 6.5 million were completed by hand, without the use
of tax-preparation software.
Anyone who has tried to complete a tax return manually knows that the task
can be daunting and confusing, not to mention potentially costly.
"This survey reveals that the tax-filing habits of many Canadians may
inadvertently cost them money," says Joanne Birtch, UFile's director of
marketing and communications. "It is clear that taxpayers need some guidance and
advice, either from a tax professional or tax software, on how best to complete
and submit accurate tax returns to ensure they are able to get the best returns
possible for themselves and their families."
Historically, one of the most common errors has been mathematical mistakes.
Presumably, the use of a computerized tax-preparation package should eliminate
computational errors; some packages even guarantee it.
For example, Intuit Canada, the makers of QuickTax and QuickTaxWeb, claims on
its Web site that its software "is 100% accurate and will ensure that your taxes
are filed properly. Our guarantee to you is backed up by our warranty -- if you
are levied a penalty by the CRA solely because of a calculation error using
QuickTaxWeb, we'll reimburse you the penalty."
Another reason to consider using software to prepare your taxes is for the
tax-saving tips and strategies. Unless you're well-versed in the ever-changing
tax rules and regulations, you may not otherwise be aware of these
opportunities.
A typical example may be something as simple as pooling donation receipts and
claiming them on one spouse's or partner's return. The first $200 of donations
claimed in a calendar year is only eligible for a tax credit at the lowest rate
(15% federally in 2005) while anything above that is eligible for credit at the
highest rate (29% federally). By pooling a couple's donations on one return,
anything over $200 is eligible for credit at the highest rate.
This and other types of optimization should automatically be done by a
software package. For example, UFile's MaxBack refund analyzer claims to
"process tax returns for you and your family members automatically, finding
every possible deduction or transfer to minimize your taxes and maximize your
refund." Similarly, before filing your return, QuickTax's EasyStep Review
automatically checks for tax-savings opportunities you may have overlooked.
Finally, even if you prepare your own return using software, it may be
worthwhile to sit down with a tax professional after you've filed to see if
there are additional opportunities to employ tax-savings strategies throughout
2006.