Tax season creates a certain level of discomfort for many Canadians, even if they have a simple return to file the tax jargon thrown at us during this time of year can be incredibly daunting. With the rise of online tax software it is becoming easier and more straightforward to file your return, but there are still a number of instances where you may look to hire a tax professional. While you might be able to fiddle your way through the forms, there are some cases where wouldn’t want to make a costly mistake.
Here are 6 situations where you should consider hiring a tax professional:
1) If you are filing an election
In certain circumstances you will be required to file an election with your tax return. In a number of situations if you do not file the election on time it will not apply which could lead to a large tax burden for an individual. It’s important to speak to a professional if you come across a situation where you will be filing an election so that they can ensure all of the appropriate information is included and it is filed on time.
2) Complex return with multiple sources of income
Hustle hard this year? Multiple sources of income can be daunting to sort through. Maybe you have an investment property, plus investment income, and you sold your bitcoins. In situations like this it’s important to reach out to a professional to ensure you are classifying all sources of your income properly and that all amount are being reported.
3) If you have more than 100,000 of foreign property
When people read this they tend to think it means owning a home in another country. While this is true this also pertains to investments you might hold such as ETFs, stocks, bonds, and mutual funds. Note that even if you are holding these amounts in a Canadian brokerage you are still required to report them on a T1135. However, you only need to focus on the cost basis of these assets not the market value.
4) Own a company
If you have incorporated it is important to get a tax professional involved. There can be strategic ways to pay yourself as well as elections that you may need to file. Many people are also unsure of what is deductible and what is not allowed so it would be important to make sure that you are on the right side of the law.
5) Left the country or earned income in 2 counties
Every country has its own rules when it comes to taxes. For example the US requires you to file based on citizenship where Canada requires you to file based on residency. If you earned any income in another country it would be important to speak to a tax professional. There are treaties that will help you avoid double taxation, and tax credits that can flow across the borders. Individuals that have income in more than 1 country have complex returns and should not try to attempt them alone.
6) If you haven’t filed your taxes, ever!
It may seem scary if you haven’t filed your taxes in years but getting a tax professional involved is important. In doing so they will be able to help you fill out a voluntary disclosure to ask CRA not to charge you interest. In addition to this they will have access to older tax software and can help you work through your tax returns for all of the outstanding years and stay current going forward.
At the end of the day it’s up to you whether or not you want to hire a tax professional. If you don’t fall into any of the categories above you still may chose to hire a professional because you don’t have time or it’s something that causes you a great deal of stress. There is no right answer but if you’re feeling overwhelmed it’s probably time to pay for help!