Wondering if it’s a good idea to file income taxes on your own?
If you have a simple tax situation—just a T4 and an RRSP slip—you can easily do it yourself. When you DIY, you can do your taxes in the comfort of your own home and have control over everything to ensure it’s accurate because after all, no one else knows your money like you do. If you’re a small business owner, have rental properties and/or non-registered investment accounts, you should really get some help from a tax professional. Also, read our article Tax Deductible Expenses for Small Business Owners to learn about some deductible expenses to keep in mind so you can maximize your tax return for the next tax season.
Links of each step lead to quick YouTube videos which can help you file on your own:
Step #1.1 Make a list of income sources
Think about where all of your money came in from last year, even go through all of your deposits in your bank account. Make a list of all the different places it came from and what type it was (employment, self-employment, investment, capital gain etc.) then write down the type of slip that you are expecting for each. If you are into Cryptocurrency, be aware that not only do you have to pay taxes on gains, but the tax authorities have the top five to ten percent of Coinsquare traders’ information on hand, including their entire trade history. Forget a slip? If you don’t find your T5008 Statement of Securities Transactions slip then you will be fined any income that you do not report on your tax return. If they find it and they can identify it on the other end, they will penalize five to ten percent of whatever income was on that T4.
Step #1.2 Make a list of credits & deductions
These include:
- Charitable and political donations
- RRSP Contributions
- Medical Expenses
- Childcare Expenses
- Student Loan Interest
- Professional or Union Dues (if not on T4)
- Investment advisor fees
- Interest Expenses for Investments
- Moving Expenses
- School supplies (teachers)
- Tools (tradespeople)
- Employment expenses (T2200)
- Tuition Credits (T2202)
- Canadian digital news subscriptions
- Rent or Property tax (Ontario and Manitoba)
Click Here for the CRA’s full list. Please find each receipt, as the CRA will not accept credit card statements or bank statements as proof. Canada has a generous tax credit system for donors to charities. But, keep in mind that charitable donations must have official donation receipts that the registered charity has issued with their registered charity number included.
Step 2: Gather
Make sure you are ready to file on your own in the coming year by staying organized. We use Google Drive, a folder for each year with subfolders (ex: receipts, credits, T-slips and other income). If you’re more of a paper person, you can use colourful folders and put them in one central place to keep it all together.
Step #3: Fill it out
Once you have made a list and gathered all of your information from that list in an organized fashion, the next step is to fill out your tax return.
Online
There are online tools that make it simple to DIY your personal taxes, such as WealthsimpleTax (formerly SimpleTax) which is ‘pay what you can’. It’s a CRA-certified tax software, as are these other pay what you can products: StudioTax, H&R Block Online, CloudTax, TaxTron, and TurboTax.
WealthsimpleTax incorporates smart tools that make filing your taxes fast and accurate. Use the “Auto-fill your return” feature by connecting your CRA My Account and automatically importing your tax slips. If you haven’t yet registered for My Account yet, check out this blog post, where we show you the step-by-step process of registering a My Account within the CRA website. You can also “smart search” by keywords to add all the forms and slips you need to your return in just a few clicks.
By paper
Find the forms you need to submit your tax return by paper. If you can’t print them out, they’re usually available at Canada Post offices. 2021 income tax packages are available as of January 18th, 2022. \
Hire a Pro
A franchised tax service like H&R Block is a cheap, easy, and quick way to take care of your income tax return. In addition to going to one of the pop-up in-person locations found in your local mall or superstore, you can upload your documents remotely and a “Tax Expert” will file your taxes. This type of service is good for T-4 employee income with RRSP contributions, but that’s about it. Don’t go this route if you have more than a few slips.
Still unsure which option is for you? Check out our blog with even more details to help make your decision.
Step 4: File your taxes
After doing the legwork of filling out your tax return the final step is to file. You can either mail your form by snail mail or upload your form with a PDF. You can use one of the CRA-certified tax return software to fill out the form and automatically upload it. As well, if you don’t need the auto-fill, NETFILE is an electronic tax-filing option allowing you to file your income tax directly to the CRA online. Tax returns filed via NETFILE must first be prepared using certified software, linked above in the second paragraph.
Q&A
“If I have a child who is under 18 and working, but lives in my home do they have to fill out a separate tax return or should I include it in mine?”
Unfortunately, kids are no longer a tax deduction. There is a student tuition credit, so if you’ve paid for their education they can transfer 5000 credits to either their parents or grandparents.
Students who live at home and work part-time should file their own taxes, as for benefits, they’ll get some tax deducted at the source. Everyone in Canada gets about a $13,000 personal tax break so if they make less than $13,000 they’re not paying any income tax. If their employer has deducted some of it at source and they have a T4, they’ll get that money back.
If you’re interested in DIYing your income tax return, there are many very good Googleable blogs and other videos out there to guide you, as well as courses that teach you to do your tax return. Remember that changes happen every year. While all of the information is readily available, you still have to take the time to learn about it and find out whether it applies.
If you’re a creative entrepreneur, we’re here to make sure your financial situation reflects your value. The first step is making sure you aren’t stressed about the tax authorities. Learn more About UpSide. Unfortunately, we are unable to take new personal tax clients at this time, but we hope this article helps you navigate filling a tax return and even saved you some money.