How do You do your Taxes?

inCRA, Income Tax, Interest Rates

Gone are the days where I did my taxes with pen and paper. Happily those days are over.

I use TurboTax to do my tax returns and for those of my direct family. Other software solutions work just as well, but I am comfortable with this tool, so I keep using it.

Typically I do my taxes over about a 1.5 month period. I must wait while the various tax receipts and such arrive at my house.

Typically the methodology followed would be something like:

  • Purchase TurboTax, at Costco. This is usually the cheapest place to get it.
  • Update TurboTax. The software does this automatically, but needs to be done. The updates are important.
  • Create this year’s tax returns for my family, based on last year’s TurboTax files. The software manages to bring forward a lot of useful info like personal info.
  • TurboTax allows you to import data from the CRA site. This year, it is more exciting, as I am locked out.
  • Use my last pay stub for most data needed, until my T-4 arrives.
  • Go into Quicken and glean out whatever information I think I can get, and do a rough estimate of what my taxes might be. Inevitably I overestimate how much tax I have paid and I start getting delusions of large tax refunds, but that is soon remedied.
    • TurboTax does have an import from Quicken tool. Every time I use it, it has not gone well, so I eschew this tool.
  • With this estimate I will see if there is a need to buy RRSP’s to lower tax owed, which usually is not the case
  • As each receipt and/or T-4 or such arrives I then type it into TurboTax and watch my estimate become a closer to reality number
  • Over this time I will remember things I have forgotten to input. I will add them with glee seeing my refund number inflate.
  • By the time the first week of March rolls around my return is 95% complete and factual (i.e. not based on estimates). I can then start thinking about E-Filing my return.
  • Finally the decision whether to submit my returns via E-File. This usually happens on a Sunday morning.
    • Sometimes, there are issues E-filing, so keep all receipts and take screen shots.

And Then?

With that, I await to see whether I forgot something (inevitably a receipt will appear near the end of March, which I have forgotten about), or whether I made an incorrect assumption, when the CRA sends me their response to my submission.

Addendum

This is a rewrite of an article from 2010.

{5 comments}

  • asMarch 6, 2010, 10:49 AM

    The TaxChopper extra deduction mentioned by Neil’s comment had to do with the foreign tax credit, see this post in the Canadian Financial DIY blog:

    http://canadianfinancialdiy.blogspot.com/2009/03/taxchopper-formerly-cutetax-living-up.html

    Fun reading, especially the comments…

    Reply
  • NeilMarch 4, 2010, 10:32 AM

    I don’t so much cry about the amounts paid – overall, I get enough deductions that I figure I’m consuming enough government services to consider it reasonable value.

    What I cry about is all the other Albertans who are convinced that we have lower taxes than the RoC. (This is only true in the highest tax brackets.)

    Reply
  • Michael JamesMarch 4, 2010, 6:49 AM

    In your income tax procedure, you forgot the step where you look at the total taxes paid for the year and cry.

    Reply
    • bigcajunmanMarch 4, 2010, 7:33 AM

      Very true, I think it’s implied throughout the procedure, but yes, that needs to be added as well, possibly as the last step, once I know exactly how much I paid in taxes.

      Reply
  • NeilMarch 4, 2010, 2:10 AM

    This seems like a lengthy process. I also use quicktax (and have been using it since it was pretty much the only game in town), but I just wait until all the forms I’m expecting are in, then sit down one Sunday morning and spend the next 3 hours doing taxes. Most of the time is spent calculating medical expenses and figuring out which ones have been reimbursed and which ones haven’t. Time well spent, though, since medical expenses are usually about 1/2 my refund. I’ll then wait a week or so to file, just in case something I’m not expecting arrives.

    If you’re interested, Canadian Financial DIY did a comparison of web-based packages last year, and found that TaxChopper got him the biggest refund. He contacted CRA about the variations between programs, and they tested and found the larger refund to be completely legal, and the result of better optimisation, specifically dropping a little known deduction into a box that doesn’t sound right, but is. There’s several posts, the summary is this one:
    http://canadianfinancialdiy.blogspot.com/2009/03/review-and-ratings-of-web-tax-software.html

    Reply

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