There is no going around paying taxes in Canada. Every citizen and business entity has to pay taxes to the Canada Revenue Agency (CRA) to ensure you fulfill government obligations and avoid legal trouble.
Canada’s annual tax season has already begun, and taxpayers have until May 1 to file their returns. Citizens may accomplish the necessary paperwork and payments online or through physical avenues.
Regular tax payments can be easy to accomplish for some people and organizations. However, some circumstances might make it challenging to do so. In these cases, finding and hiring a tax professional could be more beneficial than doing the task yourself.
What Is a Tax Professional?
Tax professionals cover a range of titles with different degrees of educational backgrounds, experiences, and specializations concerning taxes in Canada.
Something they all have in common is a working knowledge of Canada’s tax system. They can also sufficiently help in adjacent areas depending on their expertise.
- Canadian tax CPAs. They are chartered professional accountants (CPAs) that specialize in tax matters. They can provide tax planning advice and assistance if you get flagged for a CRA audit.
- Canadian tax lawyers. Canadian tax lawyers often have similar training and knowledge to tax CPAs. However, they will focus more on the legal aspects of tax issues. For example, in case of an audit, tax lawyers can draft legal notices of objections while the CPA focuses on the numbers.
- Tax preparation accountants. Non-CPA accountants can assist in tax preparation and other financial activities. These tasks include recording and organizing financial transactions, preparing budgets, and analyzing financial statements.
- Tax preparation services. Many firms and individuals offer tax preparation services. Their staff can have varied qualifications. For example, bookkeepers, accountants, and CPAs have different educational and training backgrounds. Discussing your needs with them beforehand ensures they are prepared to handle your tax situation.
Assess your needs first to determine which tax professional best suits your situation. Tax professionals with more training and certifications, such as tax lawyers and CPAs, may charge more.
When To Do Taxes Yourself
Not all situations call for hiring a tax preparer or another tax professional. Their services are important, and working with them can ease your workload.
However, they will charge according to their services and expertise. While some situations may require a professional, doing specific tasks yourself is sometimes better.
Here are some situations when you would be better off doing your own taxes instead of hiring a professional.
Your Financial Situation Is Simple
Doing taxes yourself is possible and less complicated if your financial situation is relatively straightforward. If you’re single, only have one income, and don’t have a lot of property to your name, doing your taxes wouldn’t be an arduous task.
Various CRA-approved tax software and apps are also available to help you file your taxes. TurboTax, Wealthsimple Tax, and Taxtron are popular mobile and web apps you can use to help you with the process.
Do you Have the Time?
Tax preparation can take quite a while, especially if you’re unfamiliar with the process. If you have enough time, it would be best to handle the task yourself. This advice also applies if you don’t have the budget to hire a professional.
Doing your taxes can be free or come at a minimal cost if you know enough about the process. Depending on your experience and financial situation, the process could take several hours, spread across a few days.
You Are Financially Savvy
You can calculate and file your taxes if you know your way around the Canadian tax system, including tax laws. Even a working knowledge of finances and mathematical formulas can be helpful.
You can apply your knowledge to your current financial situation and save some money this way.
When to Hire a Professional
While some could benefit from doing their own taxes, there are situations where hiring a professional is the best course of action.
You could be perfectly capable of doing the task, but some cases require you to work with experienced tax accountants. Let’s discuss these situations below.
Your Financial Situation Has Changed
A lot can happen in a year. You might have taken on new sources of income, started a new business, bought a new property, gotten married, or divorced a partner. These situations often reflect in your finances.
If you are unfamiliar with your new financial situation, it would be helpful to work with a professional. They can walk you through any changes that might have occurred and guide you through the tax preparation process.
Do you Own a Business or Are Self-Employed
Running a business can be a complicated process, especially concerning your finances. It can be challenging to separate your personal and business finances. There are also many moving parts, such as possible deductions, profits, and losses.
A tax professional can help you wade through these complexities. Try to find an accountant or tax preparer specializing in helping small businesses or self-employed individuals. This way, their knowledge, and experience will better apply to your situation.
You Are New to The Country
Moving to a new country is already an overwhelming experience. This difficulty can be compounded by dealing with taxes. Tax laws and requirements from your previous country of residence might differ significantly from those in Canada.
In this case, you can consult a tax professional to understand the Canadian tax system better. If you know how to pay your taxes, a simple consultation will ensure you don’t miss anything.
Factors to Consider when Choosing a Tax Professional
A tax professional’s services usually don’t come cheap. For this reason, it’s essential to make sure you choose the right professional or firm. You can do this by assessing your needs first and setting some criteria you can use in the selection process.
Tax professionals’ rates can differ depending on the types of services you need to avail. For example, routine tax preparation would cost less than preparing for a CRA tax audit.
Some tax professionals charge hourly rates, while others charge flat rates for certain services. If you own a business and require a resident accountant, consider discussing retainer fees for your prospects.
The qualifications you must consider will depend on the services you need the tax professional to perform.
CPAs, tax lawyers, accountants, and bookkeepers have some common ground. However, they differ in the types of services they are qualified to provide.
If you only need routine upkeep of financial records or simple tax preparation, bookkeepers and accountants can help. However, you need a qualified CPA or tax lawyer if you are facing a CRA tax audit.
Interviewing your prospects is essential in the selection process. Many tax professionals advertising their services often already have experience handling tax matters for various clients.
All tax professionals have a working knowledge of the tax system and its various processes. However, choosing someone with experience in your field can give you a unique advantage. This way, they have the necessary context and knowledge to provide sound financial advice.
Taxes can be complicated to understand and handle, but a professional’s assistance can help you through the process. However, their services can be expensive. Make sure to assess your needs and current resources to determine whether hiring one is necessary for your situation.