Filing your taxes is one of the most important parts of being a responsible citizen…apart from not committing a crime, we suppose.
The decision to do your own taxes or use an accountant depends on several factors, including your familial status, familiarity with filing income taxes, and the complexity of your financial situation.
So let’s break this down so you can make a smart financial decision this year when filing your taxes. What are the pros and cons of doing your own taxes versus using an accountant?
Benefits of Doing Your Own Taxes
The first benefit is that you save money that would be spent hiring an accounting professional to file your taxes for you. Aside from saving money, you’ll also find the following benefits if you decide to do your own taxes this year:
You exercise more control over the tax filing process. If you prefer hands-on work when it comes to your finances, you may want to think about filing taxes on your own. Doing your own taxes is the best way to take charge of your finances without relying on an accountant.
Flexibility. Doing your own taxes allows you to file on your time schedule, meaning you don’t need to worry about submitting your tax documents to an accountant by a certain deadline. You can tailor your tax preparation based on your own schedule and individual needs. That said, you still need to file your personal taxes by the Federal Deadline (May 1, 2023) to avoid late penalties.
Education. Another benefit to doing your own taxes is that you’ll gain a better understanding of the tax laws and regulations that govern Canada–something that can be invaluable for self-employed individuals or small business owners looking to use the tax code to their advantage.
Understanding your financial situation. Filing taxes on your own allows you to understand your financial situation when it comes to income, expenses, and how it affects your net income at the end of the year.
Downsides To Doing Your Own Taxes
While there are plenty of benefits to doing your own taxes, there are some downsides to consider.
First, and probably the most common, is that doing your own taxes may result in errors in the tax filing process. Without a trained financial professional or accountant to look over your taxes before submission, it’s possible to miss critical steps in the tax filing process. If the government decides to audit you or your business, this may lead to legal issues or other penalties.
That said, many online programs, like TurboTax, offer an expert review before you press submit on your return. This is an additional fee but does provide some peace of mind when filing.
Filing taxes on your own is also time-consuming. No matter your financial situation, it takes time—outside of working hours—to do your taxes. We know we said this was also a benefit, but unless you have amazing productivity skills after a busy day, it can feel overwhelming.
Without training on tax regulations and the tax filing process, you may spend hours trying to file your own taxes; Time that could be used in other ways, like enjoying an adult beverage on a nice patio somewhere.
Finally, filing your own taxes may result in missed opportunities in taking advantage of tax laws. There are plenty of tax credits small business owners and self-employed individuals can use to reduce their taxable income and pay less in taxes each year.
Benefits Of Using An Accountant For Tax Returns
Using an accountant for tax returns is the preferred option for many small business owners and self-employed individuals. It ensures that there are minimal errors in tax filing and that you take advantage of all the benefits the government offers.
Here are some additional benefits of using an accountant to file taxes:
Time savings. Self-employed business owners typically have a lot on their plate. We know how you feel. Using an accountant to file taxes allows you to focus on other important tasks in life and business.
Expert advice. In addition to filing your taxes, accountants and trained tax professionals provide expert advice on optimizing your tax strategy and minimizing your tax liability.
Tax credits and deductions. Tax professionals and accountants ensure that you take advantage of the tax credits and deductions available to you as a taxpayer. For example, the tax credit for first-time home buyers increased from $750 to $1,500 for qualifying homes that were purchased on or after January 1, 2022. Without working with a tax professional, you may not be able to take advantage of this tax credit and many others.
Downsides To Using An Accountant For Tax Returns
There are several considerations you should consider before deciding to work with an accountant.
First, using an accountant for tax returns and tax planning can be expensive, especially if you have a complex tax situation. Average accountants in Canada charge up to $400 per hour for tax planning and preparation. It may bump up, especially if you’re doing a last-minute filing.
Additionally, if you and your accountant fail to communicate effectively, it can lead to misunderstandings and costly mistakes. It’s important to work with an accountant who you feel comfortable with and who is responsive to your needs.
If you’re looking for an accountant, reach out to your mortgage broker. Our brokers have amazing connections with accountants, lawyers, financial planners, and more to help with all your financing needs.
Should You Do Your Own Small Business Taxes?
As a small business owner, the decision to do your own small business taxes comes down to your financial situation and preferences for filing taxes.
Most small businesses have the ability to take advantage of tax credits and deductions offered by the government, and doing your own taxes means you could miss out on these crucial benefits.
However, small business owners strapped for cash may find that doing their own taxes makes more sense. It’s important to understand that doing your own taxes as a small business owner may take a significant amount of time and result in costly errors in your tax preparation.
Who Should Do Your Taxes?
We tend to lean more towards folks using an accountant for filing their taxes. Woah…we actually didn’t say “It depends” this time.
It’s like what we say about working with a broker; they are there to work for you. An accountant is going to be able to make sense of your tax situation, find your max deductions, and help you feel confident in your overall filing.
We didn’t even get into the importance of taxes when you’re wanting to buy a new home or refinance your current one.
If buying a home or refinancing is in your plans this year, having an accountant and a mortgage broker working for you is going to make the process far less stressful.
And let’s be honest, we could all use less stress in our lives!