Andrew Goldman has been writing for over 20 years and investing for the past 10 years. He currently writes about personal finance and investing for Wealthsimple. Andrew's past work has been published in The New York Times Magazine, Bloomberg Businessweek, New York Magazine and Wired. Television appearances include NBC's Today show as well as Fox News. Andrew holds a Bachelor of Arts (English) from the University of Texas. He and his wife Robin live in Westport, Connecticut with their two boys and a Bedlington terrier. In his spare time, he hosts “The Originals" podcast.
There are some great reasons not to file taxes for free online. Maybe you’re a not very powerful villain who dislikes trees so much that you take any opportunity you can to use paper to contribute to the death of a nemesis. Or maybe your name is David Thomson and you’re the richest man in Canada and you need an accountant armed with an adding machine equipped with a few extra zeros.
The rest of us working stiffs, however, might take advantage of the ease of paperless fee-free online filing, providers of which have multiplied over the last few years.SimpleTax is simple, even if your tax situation isn’t. File your return with confidence it’s done right, and pay what you want—there’s no catch.
Steps to filing taxes online in Canada
1. Make sure you’ve got online access to the CRA
Every Canadian taxpayer hoping to file online needs to be able to access “My Account” through the CRA, which the agency explains is “a secure portal that lets you view your personal income tax and benefit information and manage your tax affairs online.” There are two ways to sign in. The first is you have an account with one of the sixteen big banks the CRA calls “sign in partners.” If you can access your account online, you can easily use that sign in info to get directly into the My Account section. The second method is by using a CRA user ID and password to log into the CRA website. If you don’t have a login and password (or have forgotten it) register for one here. To confirm you are indeed you, they’ll ask for your social insurance number as well as one of the figures from a past T4 slip.
2. Choose a NETFILE certified tax software
You may have an accounting degree, but the CRA will still not allow you to go on its site and file your tax return through its NETFILE system. For that, you’ll need to choose from one of many online tax preparation software available. Naturally, to keep the riff raff from stealing any of your financial information, the CRA is pretty rigorous about kicking the tires of the companies that it allows to access NETFILE, the system used for filing to the government electronically. In fact, you can easily access a list of all certified software on the CRA’s website. If you’re at all concerned about bogus providers, use one of the links off the CRA page to link directly to one of the dozens of certified services.
Are all services the same? In one important way, they are. The certification process that the CRA subjects all electronic suitors to assure a uniformity in the results of the returns. In other words, no company offers a method to scoring a bigger refund than any other. They do, however, differ in other respects. Here’s a few things worth checking on.
3. Make sure it has an Auto-fill Option.
Unless you’re the kind that simply can’t live without hours of manual data entry, look for a provider with an auto-fill option. Most will offer the auto-fill ability, which, once you’re signed in, will automatically fill in the parts of your return that the CRA has access to, like your T4 reported income for instance. This greatly simplifies the process, so make sure the software you choose offers it.
4. Choose software that allows for refund optimization
Unlike our neighbours to the south, here in Canada there’s no such thing as filing jointly with a spouse or domestic partner. However, using what’s known as refund optimization, you can reduce your overall tax bill by playing with certain credits and deductions in a way that will benefit you as a couple. Contributed $200 to a Save The Pigeons charity? Either one of you will be able to claim the deduction but it will likely save you more if it’s reported in one spouse’s return. The software you choose should be able to link your return with your spouse/domestic partner’s and tell you where it makes most sense to include deductions like these.
5. Use the smartest software you can find
What if you went to a shrink who every week introduced himself and started the session by saying, “Tell me about your mother.” You’d probably find another therapist, no? Your tax software is the same way. It should ideally know everything about you and remember it in perpetuity. When you sign in, it should automatically import some of your data from your previous return into your current year tax return. It will save you a lot of time and also greatly reduce the chance of data entry errors. The smartest software will also be able to recommend strategies that will save you money, for instance suggesting that you should consider carrying forward deductions that won’t help you on your current tax return but will in coming years.
6. Watch out for the upsell
The CRA divides its certified software categories into “free products and products with pay what you want model,” and “paid products and products with free offerings.” The second category is largely made up of companies that have a bare bones filing platform that is free, but once on their site, they may do everything they can to upsell you on paid products, and perhaps push you into thinking you need them when you might not. You’ve been warned!
Paid products, like audit protection plans, an insurance that assures that should the CRA audit you, their company will serve as an intermediary, are more controversial. Full tax audits are exceedingly rare (the CRA devotes most of its resources to business, not individual audits.) And as Toronto tax attorney David Rotfleisch told Global News, should you be audited, you might be better off hiring a bone fide accountant or tax attorney to help you rather than relying on someone with unspecified qualifications. Rotfleisch said:
“The unknown is the level of expertise of the people providing the representation services,”
He went on to point out if the representatives do not have the proper expertise, the taxpayer’s situation may very well be prejudiced.
7. Investigate the type and the quality of the support you can expect
Support might be more important to some taxpayers. Freelancers or those with more complicated tax situation, like those with multiple sources or income like rental or investment income, may feel that they require a bit more hand holding. Some free tax filing services offer phone support for an additional fee. While most free or pay what you like services do not offer human telephone support, they may offer email or chat support. There will likely be striking differences between the quality of both telephone and email support of the various companies. Before choosing, find a software that hires staff that’s well versed on Canadian taxes and able to communicate with you in your native tongue, whether it’s English, French, or Chinese; during tax season, some tax preparation software companies staff up with seasonal helpers thousands of miles from Canada, who, no fault of theirs, aren’t exactly the ideal correspondents when you’re white knuckling through your return. So check their website or reach out to any prospective service and get the lowdown on their support. Keep in mind some totally free tiers will offer limited support and you may have to pay additional fees for additional support.
If you have trouble locating a human who can answer your question, it’s probably a good indication that support isn’t their strong suit. And don’t necessarily disqualify services that only offer email support; many consumers find that quick turnaround email support from staff located right here in Canada is considerably more valuable than sitting on hold for hours for telephone support from someone who neither speaks your language nor fully understands Canadian tax code.
While wait times may be long (especially during tax season), the CRA provides a toll free number for individual tax enquiries: 1-800-959-8281.
The bottom line: before you commit to a service, do your research to find the free certified software that offers the most for the least. Ask friends who’ve filed online before. Seek out user-generated reviews.
8. Set up an account
In order to sign up with any certified software, you’ll need to provide some basic information. Your name, address, social insurance number, date of birth, marital status will pretty much cover it.
9. Gather your documents
T slips will be issued for most anything that’s relevant to the CRA. If you withdraw from an RRSP or receive Employment Insurance benefits, you’ll get slips for that. Investment income will get you a T5. In addition to any of those, you’ll receive the plain jane T4, AKA, “Statement of Remuneration Paid,” which includes scads of information within its dozens of boxes, including your full time employment pay, and and any income tax withheld by your employer or deductions like CPP contributions and EI premiums. Pension collectors will receive a T4A.
If you’re using Auto-fill, actually possessing a copy of your T4 won’t likely be necessary. Auto-fill (from the CRA) allows you to easily import much of your tax information to your tax filing software. Despite this there’s lot of other stuff you will need: invoices if you had other non-salary income, rental property income records, medical bills, and detailed receipts for deductions you plan to claim. Padding one’s taxes with inflated deductions is a favourite pastime of a small sliver of Canadians, but take it from us: tax padders should take up another hobby, like scrapbooking.
The CRA has seen it all, and knows all the hallmarks of tax scofflaws such as deducting 100% of your home or car as a business expense or trying to claim that a $5,000 Brioni jacket is deductible as “protective clothing.” If you cheat even a little and are caught you could be hit with major fines; if the CRA determines that you purposely provided false information on your tax return, you will likely be charged a penalty of at least $100 or an additional 50 percent of your unpaid tax or bogusly claimed deductions. If your cheating rises to the level of tax evasion the government may try to put you in jail; the CRA produced a short film that will scare you into second guessing every paperclip deduction.
10. File on time
Tax day, falls on April 30 every year. If April 30 is a weekend, the deadline is the following Monday. People with self employed income have until June 15 to file. If you miss it and you don’t owe any taxes, you can breathe a sigh of relief because the government won’t penalize you for late filing (though they will happily hold onto any refund to which you may be entitled.) It’s a different story if you miss the deadline but owe the CRA money; as their penalty section of its site points out, they’ll hit you with a bill for 5% of your entire tax bill, plus an additional 1% every full month it’s late, up to a maximum of 12 months.
What happens if you file your taxes late
If you’ve somehow forgotten to file your prior year’s taxes, you’re not alone. It happens. You’ll be wading into more dangerous waters if you’ve made a habit of not filing taxes at all for many, many years. A word of advice: don’t drag your feet any longer since the longer you wait, the worse it will get for you. As the CRA site sets out in rather vague terms, “you may have to pay a federal and provincial or territorial ‘repeated failure to report income’ penalty.” You’ll obviously be in better stead had you not owed anything to the government, but either way, you could be in some major trouble. Should you not file taxes, the government may simply send you a bill based on what’s known as a “notional” or “involuntary” assessment, which means that they’ll take all the information available through income that’s been reported to them and assess taxes and penalties These rarely turn out well for taxpayers.
Probably the best way to get a handle on a lingering tax filing problem is to throw yourself at the mercy of the government by applying on the CRA’s site for its Voluntary Disclosures Program (VDP), a mechanism for those who haven’t filed taxes—or have filed taxes with erroneous information—to fix their mistake without getting hammered with maximum penalties.
The CRA maintains a great deal of latitude on how much, or how little, it collects from you regardless of how scary and huge your tax bill may be. These so-called “taxpayer relief provisions,” outlined on the CRA’s site, give the CRA free reign to put you on a humane payment schedule and reduce or even eliminate penalties and interest.Easy, fast, and even fun. SimpleTax is CRA-certified tax software that you’ll actually want to use. And you only pay what you want, no catch — get started.