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Lesson 4: Making the Most of Tax Pros
If your plumbing is broken, do you immediately call the plumber, or do you try to fix it yourself? For some, calling for help is the last resort — they wait until the living room is flooding. Some people feel the same way about preparing their own tax return. Sometimes, however, it's a good idea to admit defeat and hire someone before you get yourself into trouble. For instance, if you've just started up your own business and have no idea what kind of deductions you can take, you are probably best to hire someone — for the first year, at least. This will give you an idea of what deductions you're entitled to (and can get away with). As well, if you've recently come to Canada, have retired during the year, or have sold some property, you may want to seek some help.
Be sure you have accumulated all the information necessary before sending it to your preparer. If you have a business, your best bet is to summarize all your revenue and expenses ahead of time. This is one way to cut down your fee and ensure no relevant information is omitted.
Hiring someone may also be a good idea if you need some tax planning advice. Sometimes the additional fees you pay may actually be recovered in saved taxes! Now, that's a good investment. Be careful whom you hire for tax planning, since some individuals are more competent than others. We discuss this issue in more detail later. The next question becomes, who do you hire? Basically there are two groups: income tax preparers and accountants.
Hiring a preparer
Income tax preparers are just that: preparers. Since it is quite simple to open up your own shop preparing tax returns, most often these people have the least amount of training compared to other tax practitioners. So if you're looking for tax planning and advice, we don't recommend stopping here. For those of you who despise doing taxes, have simple tax situations, and want your return completed quickly for a small fee, visiting a preparer may be the way to go. Although most preparers who work for large preparation companies complete training before working with clients, you may still end up with a preparer who knows less than you do! As a rule of thumb, if your situation is more complicated than entering the information slips you received from the Canada Customs and Revenue Agency (CCRA), you are probably better off visiting an accountant.
Most preparation companies will charge a percentage of your refund in addition to a fixed fee, if you want your refund immediately. Think twice about signing up for this deal if your return is quite simple, or you may end up forfeiting a portion of your refund for 10 minutes of preparation time.
Where to find a bean counter
Before you go hunting through the Yellow Pages looking for an accountant, you should first ask your friends and family who they use. Be sure to find out if they are happy with the service they are getting, and whether they feel the fees are reasonable. Beyond that, you could turn to the Big Five firms in Canada: Andersen, Deloitte and Touche, Ernst & Young, KPMG, and PricewaterhouseCoopers. All of the accounting firms have a specialized tax department, where you can be sure to get answers to all your questions.
If you're looking for more personalized service, you may want to try a smaller accounting firm. Look through the Yellow Pages to find one located near you. The majority of these firms specialize in smaller owner-managed businesses, and would be happy to help you gather information, prepare your financial statements, and complete your return. If you only require your tax return done, these firms can do it for you. In fact, for many firms, taxes are their bread and butter.
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