Say goodbye to paper tax returns

Tax software makes it a snap to file returns electronically.

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by

From the magazine.

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computer_322Forget 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.

15 comments on “Say goodbye to paper tax returns

  1. Why sould I have to pay for a tax software program or an online program to file my return. Until the government makes available a free program for all tax filers to use I will continue to send in a paper return.

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    • I am also with Terry on this one. Can the government really guarantee that our data are secure and safe???
      Also I like to use my brain…. and it is really easy to fill out a taxreturn!!!

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  2. Filing your taxes online is the way of the future. I think this is great because it lowers the costs of filing, reduces errors and returns. With online tax software programs the average taxpayer now has more options then going directly to an accountant which can result in big savings.

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  3. I'm with Terry on this one.

    To follow equal access to public services principles, a free option for online tax filing should be enabled. If our government is serving its own needs via electronic filing, access must be free.

    I envision that a government-funded option might be more bare-bones, perhaps similar to the paper-based forms where values are typed but where minimal guiding and optimizing programming exists. This would be a manual data entry system for fields identical to those routinely exported to Netfile. While, many people would happily pay for a user-friendly software, it is still vital that a citizen be able to use a free medium to fulfill their legal civic obligations. If the government is acting in such a way as to encourage electronic filing, the requirement for this is even more obvious.

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  4. Used Turbo Tax & adjusted with no errors Followed the tax department instructions & tried to send using net file but all 4 attempts would not go through for a simple tax return Got frustrated so sent in a printed copy If the CRA want people to use this method It must must be easy & if some setting or programme on ones computer is not right should advise problem in an error box I have an high cost laptop with all the bells & whistles & have become quite proficient with the computer but just would go through Do not understand why & will be doing my return next week but will probably have to send in via mail

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    • Had the same problem a couple of years ago and went back to paper until I discovered Studio Tax a free program which I used last year and found it be straight forward. Managed to file it without any problems. Just Google studio tax to locate and download.

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  5. CRA has started to eliminate paper returns. They stopped sending out personalized T1 returns and by 2016 all government cheques will be direct deposit. I suspect by the same year you will no longer find the T1 Tax guide anywhere except on-line.

    There has never been any need to go to an Accountant to get your taxes done when there are many well qualified individuals who are just as knowledgeable but do not have the designation. We are slowly but surely heading towards a paperless tax system and eventually a system where the tax return itself will disappear, at least for individuals.

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  6. The best solution for online filing is for the CRA to allow you to file your tax returns directly through their website – by using the My Account feature. This of course would make all the tax packages that cost money, obsolete. I've spoken to CRA officials on this issue many times and I'm always told that they don't want to put these company's out of business, which could generate law suits against the CRA, because these companies started to sell electronic tax packages long before the CRA offered online access to taxpayers. Shame on the CRA.

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  7. I have tried for hours to "file" my taxes online without any success.Therefore,I used the "old" paper system.One week ago I received my return;and instructions from the Government to "register" with My Account on their website.This attempt has failed together with a previous attempt to access the Government's website.In a telephone conversation with the Federal Government an employee informed me that their website is not "user friendly"…Ultimately,I am frustrated and "fed-up" Someone told me it's because:"I don't vote" Best of luck with that nonsense…….

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  8. I have no problem paying for the convienance but don’t “tell” me I have to do it this way and pay a fee!

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  9. We would be much better off if we copied the Australians. The government designed and provides the software (for free) to all taxpayers. The software integrates with the records office so there is no inconsistencies with downloading the finished return. Besides the return software all tax documents submitted by the various institutions (our T4's, T5's etc) are available from the Tax Office itself so there is not need for the taxpayer to collect them. The amounts on these documents load themselves into the return at the command of the taxpayer – there is no need to keep all the paper copies sent to the taxpayer. The CRA when compared to the ATO is incredibly inefficient – OUR tax dollars at work keeping people off the street (and off of UI) by "employing" them in government!

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  10. Yes this is really helpful… Paper work just really sucks!!!

    Now we can do everything online which is really cool.

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  11. CRA should give people a choice weather they prefer Paper Return od Net
    File. CRA employees want easy way out, so that they can herass people after 2 yrs. of filing.

    Reply

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