With less than 10 days left of personal tax season here in Canada, so many people are looking for someone to prepare their tax returns. I have seen many different referrals, and wanted to provide some assistance for people in their search efforts.
As a CPA, CA and 20 year tax professional, my mission is to assist taxpayers in managing their tax risks and reducing their tax compliance costs.
KNOWLEDGE is the key to EMPOWERMENT and the first thing to note when choosing someone to prepare your taxes is that there are basically (and I’m really generalizing here for the purpose of this discussion) two types of tax professionals: seasonal tax preparers and professional tax accountants. Both can prepare tax returns, but what are the differences? And how do you choose?
Professional tax accountants have a professional designation, are members of a professional accounting body (such as Chartered Professional Accountants of Canada), and have had the necessary education, training and qualified experience to become a tax specialist. While most seasonal tax preparers have taken some tax courses (such as offered by H&R Block or certain tax preparation software companies) they MAY not have any formal education, or belong to any professional association, and are not subject to the same level of professional conduct as tax accountants are. That’s not to say that seasonal tax preparers cannot prepare tax returns – some have had years of experience and update their knowledge every year. It’s also not to say that all CPA’s are properly qualified to prepare tax returns (in which case, they wouldn’t call themselves tax accountants).
In any case, here are some key things you should consider when hiring someone to do your tax returns for you:
- Your needs: First, acknowledge what level of expertise and experience you need for your particular situation. You wouldn’t hire a dental hygienist to do your root canal, so why would you hire a basic tax preparer to do your complex return (and by complex, I mean there are several aspects to your tax situation that are not straight forward, such as having self-employment income, property or foreign property income, disabled dependents, etc.)? Someone with a couple of T-slips is going to have much different needs than someone with investments, business income, foreign property and disabled dependents.
- Expertise: Ask for their qualifications, education and training – their credentials, and what they specialize in. Tax laws are numerous and complex (as Einstein is quoted, “The hardest thing to understand in the world is the income tax”), and there are tax professionals who have more expertise in certain areas than others. If you have a complex return, you’ll want to hire someone who has the experience and knowledge related to your particular situation and complexity of your return.
- Ethics: Whether you hire a seasonal tax preparer or a professional tax accountant, it is important to ensure that the person you choose to prepare your tax return is reputable and ethical. Tax accountants (CPA’s) are regulated by a professional body with an established certification process and codes of professional conduct, and are subject to professional enforcement mechanisms to ensure quality of standards (i.e., they could be penalized and potentially lose their designation and livelihood if they don’t comply). Currently, there is no such standard in place for tax preparers who are not members of a certified professional body subject to self regulation (Note: While CRA has proposed legislation to require tax preparers to be registered and certified, there is no such thing yet in Canada. A registered E-filer is NOT a registered tax preparer…anyone who files more than 10 personal tax returns in Canada is required to be a registered E-filer and E-file those returns.). Ethics and reputation are important to me, so I ensure that my clients sign an engagement letter, and ask them a lot of questions to make sure that I have all the necessary and correct information to complete their return. If they have income they don’t want to report, or want to be aggressive in taking deductions that they may not be entitled to, I will give them the naked truth about the risks to them, and simply won’t take them on as a client (because that would impact my reputation and violate the CPA code of ethics as well).
- References/Referrals: As with any service, when searching for a tax preparer, I strongly advise getting and checking referrals. I would also recommend checking the preparer’s website and cross-checking their credentials with professional bodies/associations/etc., if you have them, to ensure that they are as qualified as they say they are. I’m leery of people who say and advertise that they prepare tax returns, yet don’t have a website or anything to verify their credentials. To me, this puts their integrity and professional conduct into question.
- Relationship: You need to be comfortable with who you’re hiring to do your returns, especially if you’re looking for value-add services, and you don’t want to be shopping around year after year. By having and building that relationship, it will help to streamline the compliance process (and planning) year after year. You’ll want to hire someone who will communicate effectively with you, and understand your needs. In that regard, you may also to be proactive and consider hiring someone who is qualified to help you with tax planning in the future.
- Fees: For many people, fees are a big deal. You don’t want to over-pay someone to prepare your return, but at the same time, you need to understand what’s behind the fees. While seasonal tax preparers may charge in the range of $50-$150 per return, professional tax accountants could charge hundreds of dollars per hour (when I worked for a public accounting firm, we would charge no less than $500 for even a basic return. My fee is less than that now, but I’m now a sole-practioner with a lot less overhead than a big accounting firm). You should know that part of the reason for the higher fees charged by professional tax accountants is the time, education, business costs, professional investment and overheads that they factor into their fees compared to that of seasonal tax preparers. Ask for a fee quote and what it’s based on ($/hour, # slips, flat fee). Also note that while tax discounting (a fee based on a percentage or your refund) is allowed, be cautious and read the fine print – such preparers MAY be motivated to over-claim tax deductions and credits and overstate your refund to get themselves a higher fee, and leave you with the cost of errors, CRA audits and tax adjustments. I’ve corrected many returns for unsuspecting taxpayers and they are the ones left to pick up the cost of errors.
If fees are a big issue and your return is simple enough, you might consider filing it yourself online (NetFile) using certified tax software as listed on CRA’s website (http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/netfile-impotnet/crtfdsftwr/menu-eng.html). If you are a low income earner, you may also qualify to have your return prepared at a volunteer tax clinic (http://www.cra-arc.gc.ca/tx/ndvdls/vlntr/clncs/menu-eng.html).
Ultimately, the accuracy and completeness of your tax return is YOUR responsibility. Hire someone who is going to help you understand what you’re filing and who will put your mind at ease that it’s been properly completed.
If you would like assistance or have a tax question, send me an email. I’ll be happy to assist.
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Disclaimer: The information provided in this article has been written in general terms and is provided as broad guidance only. It is neither a definitive analysis of the law nor intended to replace or serve as a substitute for any accounting, advisory, tax or other professional advice, consultation or service . The application of laws and regulations may vary depending on specific facts or circumstances. Readers should discuss their specific situations with their professional advisors. I, Linda Spencer, CPA/CA do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.