Nearly half of Canadians plan to crunch their own numbers this tax season, according to a new survey that suggests the do-it-yourself approach to tax filing is growing in popularity.
BMO Nesbitt Burns’ latest tax study, released Wednesday, found that 46 per cent of respondents said they will prepare their own returns ahead of the April 30 tax filing deadline, rather than rely on a tax professional, family member or friend. Forty-two per cent said they will opt for someone else to file for them.
The findings are a mirror image of last year’s results, when 46 per cent said they wanted someone else to deal with their taxes.
The trend toward self-filing is growing as households look to pare expenses like accountants and as tax software becomes a simpler alternative to the tedium of pencilling in numbers from line to line.
More than one third – 35 per cent – of those surveyed said they would use tax software to file, “an indication of the country’s growing adoption of and comfort with technology,” BMO said.
“Think of in the past when we were all writing out our tax returns... . You have to do 15 calculations just because of one change in a number,” said John Waters, vice-president, head of tax and estate planning at BMO Nesbitt Burns.
“(Software) just makes the process easier, and it’s more user friendly than it has been in the past, certainly more than writing out the tax returns.”
Of the 5.9 million returns processed by the Canada Revenue Agency already this year, the vast majority, 91 per cent, have been filed online, with just nine per cent filed on paper, according to data as of March 25.
The majority of those, 56 per cent, have been submitted by third parties through E-file, while 35 per cent have been filed by individuals through Netfile.
There have been about 400,000 fewer returns filed so far this year than during the same period of 2012, when 83 per cent were filed electronically, suggesting the proportion of electronic filings this year could be even higher when the portrait is complete after the April 30 deadline.
Tax experts believe the rise of DIY software will render self-filing even more popular in the coming years.
Cleo Hamel, a senior tax analyst at H&R Block, said a number of clients who used to come through their doors every year have switched to the company’s DIY software filing system. She believes all returns could eventually be filed online.
“Doing it yourself might be one of those things that just happens, you just get used to it,” she said.
Tax software that has emerged from H&R Block, Intuit’s Turbo Tax and Canadian competitor Ufile, are more cost-effective than paying at least $69.99 for an H&R Block filing or thousands of dollars for a complicated return prepared by a certified accountant. They also allow filers to prepare their returns when they want and where they want – no appointment necessary. H&R Block’s software runs from $15.95, while Turbo Tax starts at $17.99 for its most basic package and UFile starts at $15.95 for an individual.
As H&R Block’s network of tax consultants loses customers to tax software, the company is in a heated competition with Turbo Tax. In the United States, H&R Block is reportedly considering legal action against Turbo Tax for commercials suggesting that H&R Block uses experts “with no tax experience necessary.”
The rise of tax software comes as the CRA – striving to become leaner and more efficient – is encouraging Canadians to file online and have refunds channelled through a direct deposit to their bank account rather than receive a physical cheque.
It has removed the necessity of an access code delivered by mail that had been required in previous years, allowing consumers to file returns with their social insurance number and date of birth for security. It also cut off its Telefile system that allowed those with very simple returns to call them in and has stopped sending out paper return packages to discourage filing on paper.
But even though tax software makes self-filing easier, there will always be some Canadians who would rather pay someone else to deal with the hassle of the return.
“There are still a large number of people who hate that whole aspect, and it has nothing to do with tax, they’re just not number people,” Hamel said.
“Whether you do it yourself or you use a third party, I think it depends on where you are and what kind of tax return you have ... if the individual doesn’t understand the complexity they won't do it themselves.”
Gabe Hayos, vice-president of taxation at the Canadian Institute of Chartered Accountants, said that while most Canadians still use third-party preparers for their returns, he is not surprised by the trend toward DIY.
“As the technology improves and the software gets cheaper, people are probably at the point of buying, so this may be a trend that we see going forward.”
Many organizations, including the CRA, are encouraging self-prepared returns, and technology is the driver. Hayos is not concerned that the trend could spell the end of tax experts; rather, he believes more self-filing could free advisers to help with the more technical and complicated aspects of tax preparation.
“It’s advantageous for, frankly, the cost of preparing and the better usage of advisers, because they’re used for what they do best, which is things that are unique or unusual to deal with.”
The BMO survey was conducted online among 1,002 Canadians between March 15 and March 19. The margin of error for a probability sample of that size is plus or minus 3.1 per cent 19 times out of 20.
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