Don’t panic. There’s lots of time before the April 30 tax-filing deadline.
The question is, how will you report your income, deductions, credits and other related transactions from 2024?
The cardboard tax packages that once stood in post offices and drugstores have long been replaced by QR codes that lead to online forms from the Canada Revenue Agency (CRA).
Paper filers can print them out and mail them in, but the vast majority of Canadians have made the move online. Tax software can top $100 depending on your tax situation, but there are ways for thrifty Canadians to do it for free.
And while free is good, discount tax software could end up being costly in off-the-beaten-path tax situations.
CRA certified tax software
The choice is limited to third-party providers for software that is approved by the CRA to work with its NETFILE filing system. NETFILE is the final step to ensure the CRA has received your return securely.
The CRA website provides lists of “paid tax software” and “free or pay-what-you-want tax software.” The drop down in each category provides information on the products and services available.
Most services offer software versions compatible with Windows and MacBook operating systems, and mobile apps. They also have the ability to import T4 slips and other relevant documents from employers and financial institutions.
In addition, the CRA provides an “auto-fill my return” service that can automatically fill in parts of an income tax and benefit return with information that it has available at the time of the request. To use it, you must be registered with CRA’s “My Account”, which comes in handy for keeping tabs on your tax status, past returns, and RRSP contribution limits.
Did someone say “free”?
Some of the more popular tax software providers including TurboTax and H&R Block provide free services for basic tax situations but anything too far beyond a standard T1 return often has a cost.
Wealthsimple Tax, for example, remains free for special situations including T2125 for self-employment business and professional income, T5 for interest and dividends, rental income, capital gains or losses, or crypto trading.
Wealthsimple’s free software does not include T3 statements, which reports income from non-registered investment accounts (outside RRSPs or tax free savings accounts).
The free tax service from Wealthsimple presents an automated guide and email support for questions but offers an upgrade to a paid service if required.
The pay-what-you-want model is a bit of a mystery for those who have been taught that nothing is free. Some of the free platforms direct donations to the software designers. Wealthsimple treats the free tax-filing service as a compliment to its other financial and investing platforms.
As the tax year’s past returns can be stored on the platform, in addition to CRA’s My Account.
Returns can also be downloaded in PDF format and stored in personal files.
Beware. “Free” tax software can be costly
Free tax-filing software is a tax break in itself when you’re dealing with only basic income, deductions and credits, but it could backfire for more complicated returns and wind up costing in terms of frustration and dollars.
I know this from experience when I free-filed my 2022 return. That year involved a one-time transfer of a large amount of savings from my Locked-in Retirement Account (LIRA) through a previous employer, to a Registered Retirement Income Fund (RRIF).
It was supposed to be an even swap within tax-sheltered registered accounts, but CRA wants to see the withdrawal and deposit for its books. Instead, the software showed the deposit and not the withdrawal.
As a result, that year’s deduction far out-stripped income and my tax bill was entered as zero.
Several attempts to correct the problem failed. No support was offered through the software, CRA workers were on strike at the time, and the CRA idiot-bot named Gary was useless.
I filed hoping it would somehow be corrected but it wasn’t and the thousands of dollars that had been deducted throughout the year were returned to my account.
Following a brief flash of elation, I eventually returned the money owed after paying a tax expert double to refile 2022 and 2023 returns for myself and my wife because they are all inter-connected.
All’s cool with CRA now, but it’s a lesson on how any small tax-twist needs the right expertise.
