Our first two years in Canada, we prepared tax return using tax preparing services. We paid for these services, receiving T4s, without any additional passive income. But even now, in our and most of our readers’ cases, it is redundant to pay for tax preparation services. Although we have a dividend portfolio, profits from lending on Lending Loop, private mortgage income, and rental property, we still can prepare taxes by ourselves. Thanks to my friend who told me about StudioTax, and his positive experience with it.
The most complicated part of preparing taxes is collecting the required documents and receipts. Even if you use tax preparation services, you will need to gather the required papers. Once you have all documents the process is straightforward.
- Feed the tax preparation software StudioTax with your data (this is what paid tax services do).
- Send the forms prepared by the software to CRA. You can do it from the program over the wire or print the forms and send them by post.
Why pay for tax software, if you can do it for free? I am a fan of StudioTax free software, which you can download here.
What are pros and cons to using free software to file your tax returns?
Pros
1. The biggest advantage is that you get familiar with your financial situation. It helps you see the family’s finances in one place.
2. You will understand where you’re taxed more and less. For example, adding dividends to your tax return, you will see how it affects the total return.
3. There are no papers and post fees. A generated net file by StudioTax can be submitted to CRA online. All you need is access to your CRA account online.
4. You save money doing it yourself. In any case, gathering the required info is the hardest part of the process, and you must do it regardless.
Cons
1. It takes time to get familiar with the software. Using tax preparation services also takes time, so why not spend this time learning something new. For most, paid tax services collect information from you and feed it into software that is similar to this free option.
StudioTax
The program has an intuitive interface and an excellent wizard that helps you through the process. In most cases you do not need to use anything but the wizard. After feeding the program with your and your partner’s information, you will be able to see your possible return. All three years that I have used this program, we have received or paid the exact amount to the CRA that the program computed for us.
Every year a new version of the program is available, and currently the version for 2107 tax year can be found on the StudioTax site.
A Tax Return Checklist:
- Childcare expenses
- Kids activities receipts (e.g., hockey, soccer, dancing, etc.)
- All T4 slips
- Rental income and expense records
- Tax documents from our bank broker (stocks dividends and capital gains/loses, RRSP contributions)
- Tax documents from the mortgage broker firm with private mortgage profits
- Mortgage tax documents from the bank (details of mortgage principal and interest)
The program also hints at what you should check and reminds you about critical items. If there is a corner case, you can always check online.
If you are unsure, you can still prepare the taxes yourself and bring the filled-out forms for verification by a professional. You can easily print all of the tax forms that have been filled out on StudioTax.
Another free alternative is the TurboTax online preparation software. The TurboTax free edition version should be sufficient for simple returns, but I have not tried it. Some of my coworkers use it and have not had any issues with it.
