Top reasons to file your own taxes
I used to dread tax time; mainly because taxes scared me. Taxes, the rules, and my return were like a black hole of information that I didn’t understand. But, over the last few years, I’ve started to look forward to tax time and enjoy the exercise (this is true despite having sizeable tax bills the last few years). Which brings me to the top reasons to potentially file your own taxes if your situation is straightforward:
1. It gives you another opportunity to get intimate with your finances. Your salary is no longer something that gets deposited into your account bi-weekly or the annual income that your letter of offer or most recent raise notice lists. When you file your taxes, you see how that income gets broken down - how much the government takes, how much you take, what fees you pay, etc. Your pay slips will tell you this too, but it’s nice to have an annual summary.
2. Understanding which tax credits and tax refunds you are eligible for is critical to reducing your tax bill. There is nothing wrong with paying the taxes you owe, but there is no need to overpay. Understanding this will influence what documentation you keep during the year (ex. medical expenses or childcare receipts) and even how you spend your money (ex. taking a class at an educational institution that you can then claim).
3. More than likely, you will learn something new every year when you file your taxes. For example, ways you can optimize your return or minimize your taxes owing. The tax system is complicated with more rules than most care to count. There are great tax resources online that you can use to amplify your tax knowledge.
4. Having someone else do them, even a reputable accountant, does not protect you from tax complications. Ultimately you are liable for your own tax return so whether you do it yourself or have someone else do them, the CRA (Canada) or IRS (US) will come to you for answers if your taxes are done wrong.
5. Being aware of how much tax you pay makes you a more informed citizen and voter. Paying taxes is a good thing because it helps keep the country, and its many services, running - it’s important to understand what we’re getting for our tax dollars. Taking control of your taxes (and not dreading them) is just one more opportunity to take control of your finances, rather than letting your money control you. There are certain instances when hiring a tax professional can make more sense than doing them yourself. For example, you may be VERY behind on your taxes, have a small business or multiple sources of income. Complex situations are hard to DIY properly, so hire a pro if this is you.
Article by Jessica Alen, MeVest Contributor