Why pay an accountant to prepare your tax return? Generally the answer is one, or a combination of the following reasons:
- I don’t know how
- It takes too long
- I don’t want to miss any deductions
- I don’t want to make mistakes
- It’s a pain and I don’t want to
Let’s try and eliminate those excuses so that you can prepare and file your own personal tax return easily, accurately, and inexpensively. This post will walk you through that process, so collect your tax documents and let’s get to it!
Online Tools for Effortless Tax Filing
There are some excellent tools available that make filing your return a breeze. Our favorite combination is:
- Tax Software - Wealthsimple is an online tax preparation and filing software that allows you to pay by donation. We aren’t paid to endorse Wealthsimple, we just think it’s great!
- CRA Auto-fill My Return - Once you are set up with CRA My Account, you can auto-fill your tax return with most of the necessary information. This reduces the chance of errors and speeds things up considerably.
- Bookkeeping Template - If you have self employment income, you will want to organize your revenue and expenses in a way that can be easily entered into your tax return. We’ve created a bookkeeping template in Google Sheets to help with this. Copy the template to your own Google Drive and follow the instructions.
Step 1 - Wealthsimple Setup
The first thing to do is login to Wealthsimple, click start or continue at the top right and sign up to save your data. Once you have created a login, Wealthsimple will automatically save any progress that you make on your return.
Follow the prompts on the screen to fill out the various sections. Most of the info here is straightforward - just answer the questions one at a time.
One section that we would like to highlight is the “My Account” section. Having a “CRA My Account” will allow you to use the autofill function to import your tax information into your return. In this section, choose yes if you already have a CRA My Account setup, or move on to step 2 where we will set up your CRA My Account.
Step 2 - CRA My Account Setup
CRA My Account for individuals will let you view your tax information online, track your refund, set up direct deposit and receive mail from CRA electronically. It also creates the ability to use Auto-fill my return when preparing your tax return with Wealthsimple. To get started, you’ll need your SIN and a copy of your most recently filed tax return.
Here are the steps to setting up your CRA My Account:
- Go to the My Account for Individuals login and registration page linked here
- Scroll down to Option 2 and select “CRA Register” (you can also use Option 1 “Sign-In Partner Login” if you have an account with one of the eligible sign-in partners)
- Enter your social insurance number
- Enter your postal code, date of birth and the requested dollar amount from your most recently filed tax return
- The next page will offer you the choice of receiving a confirmation code by mail or through email if you jump through a couple of hoops. We recommend the email method as it is much faster and not that difficult.
- Once you’ve selected receive the security code by email, provide your email, create a username and password and select security questions from the drop-down menu.
- The next step will be to call CRA at one of the numbers provided to you. Stay on this page and dial the number. Tell the CRA agent that you would like to receive an email with an authorization code for CRA My Account for individuals. The agent will ask you a few questions to verify your identity (name, date of birth, SIN, and amounts from your most recently filed tax return). Once verified, they will email you the authorization code.
- Click next, enter the authorization code that they have sent to you and press submit.
Congratulations, you have now registered your CRA My Account for individuals. Have a look around at the various tax info that is available through this login. It is quite handy to have if you ever need to access previous year tax returns and notices of assessment (very helpful when applying for a mortgage).
Step 3 - Auto-Fill My Return
Now is the time to enter your income and deductions for the year. If you have a CRA My Account, you can use the Auto-fill my return button to import much of your tax info for the year. Auto-fill my return will import tax balances such as RRSP deduction limits and tax credits carried forward from previous years. It makes preparing your return easier, increases accuracy and reduces the chance of errors.
In Wealthsimple, click Auto-fill my return and follow the prompts. One thing to be aware of is that sometimes the information that CRA has on file is not yet complete. Check that you have imported all of the tax slips that you are expecting for the year. If there is missing information, you can add it manually in the next step.
Step 4 - Additional Tax Information
There are two ways to add additional information such as investment income, self employment income, tax credits and deductions and other tax related scenarios. The first method is to directly add information to your return using the search / drop-down toolbar. Type in the type of information you want to add and select it from the resulting options. Repeat this for everything you would like to add.
The other way is select the “answer a few questions” option. We recommend using this helpful questionnaire so that you ensure you don’t miss any income or deductions for the year. You will answer questions about:
- What tax slips you received
- Whether your situation allows you to claim various tax credits
- Whether you have income from other sources (rental, self employment, etc.)
- If there are more deductions and tax credits (medical expenses, donations, transit, etc.)
- Other pertinent information
The language used is easy to understand and there are helpful descriptions for each item. Once you have answered the questionnaire, you will be able to fill in details for the items that you selected. This includes one of the more common items that people struggle with: self-employment income.
Step 4a - Self Employment Income (If Applicable)
We see a lot of questions around self-employment or business income. It can be a daunting task to try and figure out how to do your bookkeeping and to understand where to put the income and expenses on your tax return.
That is why we've created a bookkeeping template and wrote an article on deducting business expenses to try and simplify the bookkeeping for self-employment income. We’ve shared this Google Sheet so that you can take a copy of it for your own use. There are instructions on the sheet as well as examples, but the general steps to use this template and to enter the resulting information into your tax return are:
- Enter your income and expense transactions for the year into the bookkeeping tab
- Enter your home office information in the home office tab if applicable
- Take the resulting information from the income statement tab and copy it into the “T2125 Statement of Business Activities” in Wealthsimple.
Step 5 - Review and Submit Your Return
The last step before submitting your return is to review the return for errors and check that you’ve optimized any available tax savings. At the bottom of the page under the Submit heading, you’ll select “Check & Optimize”. Wealthsimple will then review the information for errors that need to be corrected and will provide suggestions as well as warnings where there may be missing information. Review the suggestions, make any changes as needed and submit your return.
Before you hit submit and file your return you’ll be given the option to pay by donation, but it’s not required. As accounting nerds, we appreciate how easy it is to use the software so we recommend paying even a small amount, but it’s totally up to you.
Filing your tax return is not that difficult or time consuming with the right tools. We suggest:
- Use Wealthsimple software. Their how-to guide and video is linked here.
- Sign up for CRA My Account for Individuals to make things easier and reduce data entry. CRA's "how to register" video is linked here.
- Use our bookkeeping template if you have self employment income.
I don’t know how - Now you should have a good idea of how to prepare and file your own tax return.
It takes too long - Not really. Once you have all of the information gathered, the process of preparing and filing your turn should take anywhere from 10 minutes to an hour. That’s like watching a third of an episode of the Bachelor.
I don’t want to miss any deductions - The questionnaire in Wealthsimple is designed to help ensure that all deductions and tax credits are claimed.
I don’t want to make mistakes - Using Auto-fill my return will reduce the chance of making typos and the review process in Wealthsimple will also reduce the chance of making mistakes.
It’s a pain and I don’t want to - Ok, I suppose we don’t have an answer for everything.