Thanks to commenter David on my recent QuickTax software review, I learned that you can claim your kids and I now need to refile my tax returns for the last two years.  It is on the federal TD1 form and is plain as day (now that I look at it). So much for saving money by doing my taxes myself!  Mr. Cheap has asked me a few times if I’ve even considered going to an accountant and I now realize that he wasn’t asking so much as he was suggesting. 

The good news is that I researched how to make corrections on tax returns that you’ve already filed and it looks to be very easy.  Here is the T1 form you need to fill out.  Basically all you have to do is fill out the line number you are changing, the old value, the new value and that’s it.  CRA will recalculate your tax return.

As for the child tax credit you get a $2,000 deduction amount per child starting in 2007.  This amount goes up each year and was $2,089 for 2009 tax year.  It applies to kids who are under 18 at the end of the tax year.

In my case I had 1 kid during the 2007 tax year and then 2 kids for both the 2008 and 2009 tax years.  Please note that I’m counting my kids for multiple tax years – I don’t have 5 kids!  I believe this works out to a bit more than $300 per kid per year which means that I will get back $300 for the 2007 return, $600 for the 2008 return.  A good payoff for a fairly small amount of fixing.

I had researched writing off dependents before but I had only found this article about dependents which clearly doesn’t cover my situation and made me think that you couldn’t claim your kids.

If you live in the United States and are looking for the relevant information then check out this article called Amended tax return.

How about you guys?  Did anyone else cheat on their old returns and need to correct them?

Yesterday, Marianne made a comment on my QuickTax post asking if I could mention or review free tax software options such as StudioTax. I responded that although I don’t have the time or interest to review other tax software, I’d be more than happy to publish any reviews provided by a reader.

So with that in mind I’m going to throw the idea out to you, the readers that I would love it if someone writes a review about whatever software they use.  It doesn’t matter if you like the software or hated it – a review is a review.

As a special bonus I’ll even pay $20 for any such reviews.  I will only pay out money using Paypal so you need to have an account (it’s free).

What I’m looking for

I don’t have a set format or length for reviews but I doubt anything less than 400 words would not be of much use.  Most of my reviews are much longer than that.
If you can just describe your situation ie what version of software you need and talk about the different features, what you like about it, what you didn’t like about it, how much it costs etc then that’s probably all you need to do.

I’ll accept reviews for the next week or so.  My email is qffpillars at gmail dot com

It’s that time of year when I get to do something I really don’t enjoy doing – my taxes.  I’ve concluded that the main problem with taxes is not the form filling but rather the book keeping.  I’ve improved my record keeping system over the last year but it still needs some improvement.  My taxes are a lot more complicated than they used to be so that is also part of the problem.

I had toyed with the idea of using an accountant this year but decided against it since I couldn’t be bothered to find one and I also decided to splurge on QuickTax tax software which so far is making things a lot easier than in past years.  I’ll be doing a proper review of QuickTax next week, but so far I like it a lot.

Why are my taxes so complicated?

They aren’t really – but gone are the days when I used to just have a T4 with my income and a few deductions (taxes, employment insurance, CPP) and a couple of RRSP contribution receipts.  I still have the T4 and the RRSP receipts but I also have a few other things.

Taxable investment income/investment loan and capital gain

Until late last year I had a leveraged investment plan in place which means that I need to declare any dividend income from the investments as well as write off the interest on the investment loan.  This is complicated by the fact that switched from RBC Direct to Questrade last year.  Because I sold all the leveraged investments last year, I need also figure out the ACBs of all the stocks to determine how much capital gain there was.  The good news is that this is the last year I need to do this since I collapsed the leveraged plan.

Home Buyers Plan (HBP) loan repayments

Ok, the accounting for home buyers plans loan repayments isn’t very complicated but it is one more thing than I used to do before owning a house.

Small Business

My business which consists of this site among others makes up the bulk of the work for my taxes.  As a sole proprietorship business it is surprisingly easy to do the taxes for it but the book keeping is another story.  Last year I totally revamped how I kept track of my expenses and income by using an income/expense  spreadsheet inspired by Finance Freelance Life.  I’m going to be experimenting soon with QuickBooks to see if that helps a bit as well.

So that’s my tax story so far this year – has anyone else started their taxes yet?  Using an accountant?  Planning on doing some major cheating?

With tax season in full swing many people are gathering the necessary documents to prepare their tax return. There are many options available to consumers, each with their own pros and cons that must be considered. If you plan on preparing your tax return on your own, you should carefully research each option in order to find the one that is right for you. Here we look at the difference between two popular do-it-yourself tax preparation options – the desktop version and online version of tax software.  If you are considering using tax preparation software such as TurboTax or QuickTax (for Canadians) then this article should be of interest to you.

Ease of use

Desktop version- If you opt for this method of tax preparation you will have to download tax software to your computer from either a CD or tax software download. Installing tax software on your computer is generally easy to do, however there is always the chance that problems may arise if the software is incompatible with currently installed hardware or software. Beyond the initial installation, downloading software to one computer limits the user to that computer only to access their information.

Online version- When you prepare your taxes using the online version there is no software to install, thereby eliminating the chance of incompatibility. You can access your information from any computer using an Internet browser such as Firefox or Internet Explorer. While this can be convenient for users who have limited access to a computer, there is also a risk for those who access their tax return via a public network. If you have no other option and must use a public computer you must be certain to log off of your account and close the browser window completely before leaving the computer.

Affordability

Desktop version- The desktop version is more expensive however this can be the most affordable approach for families. Once purchased the downloaded software applies to up to five people.

Online Version- When you prepare your taxes online it is less expensive initially, however costs can add up if you have to add other options. This can still be the least expensive option for a single individual.

Security

Desktop Version- When you download software to your computer you do not have the same implied security risks as you would entering personal information online. You also have access to your tax return information when you are not online. There is still a risk associated with storing your information locally as your computer and the information contained there can still be hacked into if your anti-virus software is not up to date or working efficiently.

Online Version- Any time you enter personal data online you must first check the security of the site you are visiting. For the purpose of filing your tax return you will likely be on websites that offer the same security that is used by large financial institutions. Before entering any information take the time to review the websites privacy and security policies.

Storage

Desktop Version- When you download tax software to your computer the file and data contained on the file will remain on your computer until you delete the file. It is not uncommon to have to go back to previous tax returns therefore you should keep the software as your data can only be read by the software used to file the return. Since software changes year to year, this can be a problem if you do not have access to the original software. When switching computers you may have to transfer the data from previous returns.  Make sure that you back up your computer files religiously in order to avoid losing data.

Online Version- Websites that offer online tax preparation usually save that information for three years in PDF form. You can access this information online or save it to your computer or removable storage.

As you can see there are differences between the two options that must be taken into consideration when making your decision. Remember that every person has unique needs therefore what works for one individual may not be the best option for another. Pick the method that best suits your personal needs.  Some good software to consider are TurboTax or QuickTax for Canadians).

More resources

A complete review of popular tax software TurboTax.

What if you lose your W2 form?

Many people would rather have a root canal than file their own taxes every year but with all of the technology now available to assist with tax preparation such as tax return software like TurboTax, the decision to get help or help yourself does require some more exploration. Each method does have some pros and cons. Take a look for yourself and make a more informed decision for this tax year as to whether you should complete your own tax return or hire an accountant to do your taxes.

Complete Tax Return Myself

If math is your forte and taxes seem fun, then by all means go for it on your own. For those a bit more squeamish, there are still opportunities where you can try your hand at it with no risk involved. There are many online sites that allow you to prepare your whole return without actually paying a fee until you are ready to file. You can try it out just to see where you stand and if you are not comfortable with your input, you simply go elsewhere for help.

There are also relatively inexpensive tax preparation software programs such as TurboTax that you can purchase to make your preparation time shorter and more efficient. If you have your documentation ready and understand the laws, using the software can save you the cost of professional help. Most software will pose enough questions to help you figure out what you are doing and if you are doing things correctly.

Preparing your taxes on your own may be the right choice if your tax situation is pretty straight forward and you have the basic knowledge of income tax deductions you are eligible to receive. You can save money by processing your own taxes and not seeking professional help.  Keep in mind that efiling your return is easier than mailing it.

Hire an Accountant to Complete Tax Return

If you taxes are more complicated and require itemization, you might do better with an accountant who is up to the task and has the knowledge to get you the maximum deductions. There are professional accountants and CPAs to hire or you can opt for a chain tax preparation company. Depending on the level of complexity of your tax information, you need to do your research to find out who will best meet your needs at a price you can afford.

Professionals know which questions to ask you that will benefit your return. They will also stand by you in the event something is not correct after filing. If you have questions or concerns about your taxes, you can call on their professional expertise throughout the process. You will need to be organized and ready to get started once you mean with a professional. Some companies will bill for time while others will opt for a flat-fee service.

If you are just starting a new business or had some other dramatic lifestyle change that has affected your finances, it may be wise to seek the help of a professional accountant or tax preparer so you will understand how the changes will affect you and to feel the peace of mind knowing your taxes have been properly handled.

One thing to keep in mind is that an accountant won’t organize or locate all your tax slips.  You still need to do a fair bit of preparatory work if you hire an accountant.

More resources

2009 Income tax changes

What to do if you lose your W2 form?

As tax season is underway and people are planning to prepare and file their tax returns, they should be aware of the many changes for the 2009 tax return. From the increase in common tax deductions to numerous new deductions offered in the stimulus program, you won’t want to miss out on money you are entitled to.  If you are hiring an accountant then these might not be relevant – but make sure you understand the ramifications of completing your own tax return vs hiring an accountant.

Here are some income tax changes for 2009 tax year.

If you thinking about buying tax preparation software then consider software programs such as TurboTax

Increases from last year deductions include the following:

Standard deductions have increased for 2009. If you are single, your standard deduction will be $5,700.00. If you are married and filing separately from your spouse, your deduction will also be $5,700. If you are the head of the household your standard deduction will be $8,350.00. If you are married and filing jointly with your spouse your deduction will be $11,400.

Mileage deductions are also up for 2009. Business miles deduction can be claimed at 55 cents per mile, charitable service miles at 14 cents per mile and medical travel at 24 cents per mile.

Earned income tax for low and middle income working families who have at least two children was also increased for 2009 returns. Families will now qualify for a $5,028.00 deduction if their qualifying limit income is $43,415 or less.

New tax credits you should be aware of:

One time $250.00 payment credit for retirees, those that are disabled, disabled Veterans, and government retirees who are do not receive social security benefits. Many individuals already received this payment. Those who did not and qualify can claim this deduction on their 2009 federal income tax return.

Sales tax deductions for new vehicle purchases. If you purchased a new vehicle after February 16, 2009 you could qualify for a tax deduction. The deduction is available only for new vehicles and is limited to the tax paid on the first $49,000 of the purchase price. You must also meet income requirements to claim this deduction.

First Time Home buyer credit for 2009. If you became a first time home buyer, meaning you or you and your spouse had not owned a home in the three years prior, and purchased a home in 2009, you are entitled to a refundable tax credit. Depending on your purchase date and your income the amount and terms can vary. Be sure to check details for your situation before filing.

If you were unemployed during 2009 and collected unemployment you will receive an additional tax break. The first $2,400 you earned on unemployment wages will be tax free.

If you attended and paid for college during 2009 and were in the first four years of your first post secondary education program, you could be eligible for a tax credit. On the first $2,000.00 you paid on your education including tuition, books and related expenses you will receive a 100% deduction. On the second $2,000.00 spent you will receive a 25% deduction. Some people will not qualify for this deduction based on household income.

Tax credits are also available for qualifying energy efficient purchases during the 2009 tax year. Windows, insulation, solar energy are some of the items that qualify.

More resources

Hire an accountant or complete tax return myself?

How many years to keep tax paperwork