Say goodbye to paper tax returns

Forget the math, pencils and stamps. In 2012, 20% or 5.5 million of 27 million tax filers used NETFILE, a service that lets taxpayers file their tax returns electronically to the Canada Revenue Agency, at no charge. Another 11 million returns were filed by professionals using EFILE. Now the CRA wants the other 10 million tax filers, still filing using the paper method, to follow suit. You can still pick up tax forms at the post office but if you want the convenience of home delivery, you will need to download the forms from the CRA website or order them by phone.

Commercially available tax software makes it easy to NETFILE. According to Ipsos Reid, 95% of those under 55 have web access and 47% of those have mobile access. Even older Canadians embrace the Internet: 68% of those 55 or over have access and 16% mobile access. Key benefits of electronic filing include fast data entry, accurate calculations and faster refunds. The latter can be deposited directly into bank accounts, turning around refunds in under two weeks. Refunds averaged almost $1,700 last year.

Is this for everyone? The short answer is no. The CRA has several restrictions that still require paper filing: affected are those filing for the first time this year; those with changes to name, address or direct deposit information; those claiming disability tax credits for the first time for themselves, spouses or dependants; bankrupts or those who died last year; and immigrants, emigrants or non-residents of Canada.

Also seek professional advice if you have passed a major milestone. Life changes include birth or death, marriage or divorce, college, retirement, critical illness or death. Financial events that call for a visit with a tax professional include new employment with a signing bonus or other bonus potential, job terminations, investment gains or losses, and sale or transfers of property. Retirement has significant tax consequences, too. When should you take CPP or draw down from your RRSP? Tax filers need to know how to income-average or split income with spouses to maximize OAS or refundable tax credits, or average down taxable income to take advantage of tax credits or social benefits. Online filing, like the paper method, can be fraught with speed bumps. As they say, garbage in, garbage out. If you don’t take the time to learn proper tax filing methods alongside the speedy data entry and delivery of software, the resulting tax junk can produce painful audits and penalties. You may unwittingly overpay taxes or underclaim refundable tax credits. Double check data entry, avoid transposition errors, keep copies of slips and documents, and print the return and schedules for later review.

Check with a professional if your filing profile has higher audit risk. The self-employed or commissioned salespeople may claim many discretionary deductions the CRA may review. This is true of parents claiming child-care, medical or moving expenses. Keep receipts, auto logs and home office dimensions to back up your claims.

Choosing the right software helps file the best return now and for the important “carry-over years” in future. Leading packages keep track of unused provisions, carrying them forward into the future to recover taxes, averaging out investment or business losses, or maximizing charitable donations or medical expenses. They keep precise records of RRSP contribution room or installment payments, or refundable credits like the Canada Child Tax Benefit and provincial amounts.

Software comes with multiple features, benefits and costs, so take time to choose carefully. UFile and TurboTax are popular, with unique features to navigate data entry and tax planning. UFile is ideal for filing all kinds of returns in a family, with no need to upgrade.

If you like entering data into forms resembling paper returns or prefer pre-programmed interviews, consider the CD version of TurboTax. Both firms have free online versions for students or those with simple returns, but don’t miss transferring unused credits or optimizing provisions like pension income splitting between family members.

TELEFILE , which lets taxpayers file simple returns by phone, was discontinued in 2012. You no longer need an access code to NETFILE but you’ll need to provide a Social Insurance Number and your date of birth.

Most tax brackets and personal amounts have been indexed, and there are new caregiver credits. To avoid interest charges or stiff penalties for late filing, gross negligence, or tax evasion, file on time.

Remember, you need only pay the correct amount, but no more.

Evelyn Jacks is president of Knowledge Bureau, which offers e-learning at  www.knowledgebureau.com. Evelyn tweets @evelynjacks and blogs at evelynjacks.com.

About Evelyn Jacks, RWM, MFA, MFA-P, FDFS

Evelyn Jacks is the best-selling tax author of 55 books, an award-winning business leader and the Founder and President of Knowledge Bureau, an online financial education institute.

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