Do I need to hire an accountant to do my taxes?

Ah, taxes. We know they aren’t fun to talk about, but when it comes to giving money to the government, the more you know, the better. When it’s tax season, there are generally two types of people; the ones that hire an accountant and the ones that tackle filing their taxes themselves. Neither way is wrong! How you do your taxes is really up to you.

However, hiring an accountant can often save you way more money in the long run than the rate you pay them to do the work. If you still can’t swallow the cost, or have a relatively simple tax situation, and plan to do your taxes on your own, there are some things you should know. Here, we’ll explore whether or not you need to hire an accountant to do your Canadian taxes and the pros and cons of taking each approach.

What you need to know about taxes in Canada

Before we jump into the why’s, when’s, and who’s of hiring an accountant to do your taxes, let’s get some basic tax facts out of the way — facts every Canadian should know.

First of all, any and everyone making over $3,500 a year and living in Canada is required to file a tax return. The CRA, the Canadian Revenue Agency, is in charge of administering tax laws and collecting tax payments. They’re the people to whom you send your tax return and any accompanying cheques. When you or your accountant has finished preparing your tax return, you will know whether you owe additional money to the CRA. If you do, you will need to enclose a cheque with your tax return by mail or complete an e-payment if you file your return online.

Personal tax returns are due on April 30. This means, if you file your tax return electronically, it must be submitted on or before this date. If you mail in your tax return, it must be postmarked no later than midnight on April 30. When we refer to tax season, we are talking about the few months leading up to tax day after the prior year-end. This is when tax professionals (and you, if you choose to go it on your own) are busy preparing the necessary documents to file taxes.

It’s incredibly important to file your taxes on time to avoid any late fees. If you do not file your return on time and owe a balance, the CRA will charge you a late-filing penalty of 5% of your balance. If you are expecting a tax return, it is a good idea to set up direct deposit with CRA to ensure the return money is deposited straight into your account so you don’t have to wait for it to arrive in the mail.

With those details out of the way, let’s move on and help you decide whether or not you need to hire a professional accountant to do your taxes.

When should you do your own taxes?

There’s nothing quite like the satisfaction that comes from completing something difficult after you’ve put in blood, sweat, and tears. While doing your taxes may or may not come with these side effects, it surely deserves a badge of honor. If you’re willing to put in the time and energy to research, understand, and fill out your taxes, we commend you. It may not always be the best course of action, but if the following situations apply to you, it’d make sense to do your own taxes.

1. When you have the time but not the money

Doing your own taxes is free, or almost free if you use tax software, which can make it rather enticing for anyone on a strict budget. However, it does require some time. You’ll likely need to commit somewhere between 6 and 26 hours spread out over the course of a few days or weeks to prepare and file your tax return depending on the complexity of your finances, the method you choose, and your experience level.

If you can dedicate the hours, you may just be able to file your own taxes relatively easily and cheaply. Just make sure you do so well in advance of Tax Day, so you have time to find any answers to questions you come across and collect any paperwork you didn’t know you needed.

2. When your tax situation is uncomplicated

If you’re young and single, with one job, and not many other sources of income, or your financial situation is pretty straightforward for some other reason, you probably don’t need to hire an accountant to do your taxes. You don’t have to worry about messing it up either if you do your research and use a tax software.

The good news about filing your taxes in the modern age is that there are tax preparation softwares at your disposal. There are plenty of handy tax services available online that hold your hand as you file your taxes, making the process much more straightforward than it seems on paper. TaxTron, TurboTax, and H&R Block are some of the most popular options. Of course, using them comes at a small cost. GenuTax, however, is a completely free software that can help you handle your tax return, as long as you aren’t located in Quebec. All of these softwares are approved by the CRA as methods to prepare and file your taxes, which is critical.

3. When you’re savvy with finances

And familiar with tax laws, might we add. If you have professional experience or a passion that has provided you with sufficient knowledge of Canadian tax law and a deep understanding of your own financial situation and how the tax laws affect it, you should be able to do your own taxes, no problem. Even if you aren’t knowledgeable about taxes and finances yet, but are savvy with numbers and willing to learn before tax season rolls around, it can be worth it. You will not only save money on hiring a pro but could also save money on what you pay in taxes if you play your cards right.

When should you hire an accountant?

If you don’t have the time to do your own taxes, number-crunching really isn’t your thing, or your tax situation is more complicated than you think you can handle, there’s no shame in hiring a professional. In fact, there are plenty of good reasons to seek out an accountant to do your taxes for you. If you do decide to hire an accountant, always make sure they are accredited and have tax experience. The most common accreditation is Chartered Professional Accountant (CPA). Here’s when it may make sense to bring in a professional:

1. When your tax situation has dramatically changed

Did your income increase drastically last year, did you have a kid, and did you finally launch and profit from your side hustle? Did you make (or lose) a ton of money off of buying and selling NFTs or receive an inheritance from your grandmother? All of these instances will affect your tax situation, meaning they change your tax bracket, how you file, and, ultimately, how much you will owe. Work with an accountant who has experience working with people in similar situations and can walk you through the tax implications of your present life.

2. When you own your own business

Revenue, expenses, profits, and losses — there are a lot of moving parts and even more numbers involved in running a business, which can make filing taxes incredibly complex. In this case, it’s almost always advisable to hire an accountant who specializes in working with small business owners.

3. When you are new to the country

If you recently immigrated to Canada and have never before filed taxes in the country, it’s a good idea to talk to someone who knows the ropes. You may not need a full suite of services from an accountant, but a simple consultation will provide the guidance and tips you need to get started.

4. When you are overwhelmed

If you have begun to gather all of the documents and forms you need to file your taxes and already feel in over your head, you may want to look into hiring some help. Tax season doesn’t wait for anyone, and it may come at a time when work is extremely hectic; maybe you have a newborn or are facing a family emergency. If you find the fee manageable, it could be well worth your money to work with a professional accountant to save yourself the additional stress of filing your taxes.

The big benefit of hiring an accountant

Tax laws are incredibly complex and always changing, so even if you did your own taxes last year and the year before, not only is your present tax situation likely different but the laws that govern how much tax you owe probably are too. With the COVID-19 crisis, a lot of tax changes have occurred within the last year and the situation continues to change.

Accountants are paid to know this stuff forward and backward. It is their job to pay attention to the changing laws and understand how it affects any and everyone filing their taxes. Because they understand tax law thoroughly, they also know how to maximize the number of deductions you can claim, the ways you can invest smarter to retain more of your gains, and the best practices for your business as it relates to taxes. All of this expertise can save you major tax dollars, which can well outweigh the fee you pay the accountant.

So, whether you’re overwhelmed, in a new tax position, busy running a business, or just completely new to Canadian tax law, it’s a good idea to look into hiring a tax accountant to help you prepare and file your taxes.

So, should you hire an accountant?

Hiring an accountant can save you time and money if you have a complex tax situation or don’t have the availability to dedicate the necessary effort to filing your taxes correctly, but that doesn’t mean it’s right for everyone. You certainly don’t need to hire an accountant if you are willing to put in the work on your own. With the advanced software and plethora of free resources available to Canadians, it’s easier than ever before to do your own taxes accurately and efficiently.

We know neither option is “fun” per se, but doing your taxes is necessary if you want to live in the Great North, so choose the one that makes the most sense for your situation, and try to find solace in the fact that tax time only comes around once a year.