Canadian taxpayers have until April 30th to submit their personal taxes for 2017. Despite that deadline fast approaching many wait until the last minute to prepare and file their taxes.
The good news for do-it-yourself tax filers is that basic tax preparation software can be free and rather intuitive to use. While some providers, like UFile, for example, are more suitable for certain demographics such as students, first-time filers, and low-income filers, others, such as SimpleTax and TurboTax Free, can handle more complicated tax returns.
Here’s how SimpleTax and TurboTax Free compare:
Company: SimpleTax was founded in 2012 by three tax and software professionals. Based in Vancouver, with a team across Canada, SimpleTax built its platform with user experience in mind and won an award for best customer experience at the Vancouver User Experience Awards.
Who it’s for: The SimpleTax platform is built to handle simple returns and complicated tax situations, including business, rental, and investment income.
Features: SimpleTax can instantly import tax information from the Canada Revenue Agency with Auto-Fill My Return.
Your entire return is on one page and your refund is updated instantly as you type. A smart search feature lets you add things to your return in any order.
Get maximum refund optimization, which includes pension splitting, spousal dividend claims, the allocation of credits and deductions between partners, carryforward amounts, and suggestions for additional deductions and credits you may be eligible for based on your tax situation.
Users can access Express NOA, a secure Canada Revenue Agency service that allows individuals and authorized representatives to view the notice of assessment (NOA) in their software, right after the return has been received and processed.
SimpleTax customers can also use ReFILE, an online service that lets individuals and EFILE service providers send online adjustments for income tax and benefit returns.
After successfully submitting your return to the CRA, they’ll ask if you’d like to support SimpleTax. You can pay what you want, including zero. There are no income limits, restrictions, up-sells, or ads
Who it’s not for: Anyone can use SimpleTax as long as they aren’t subject to any of the NETFILE restrictions, for example if you went bankrupt in 2017 or 2018, or if you are a non-resident of Canada.
Company: TurboTax is part of the Intuit family and is Canada’s number one tax software, providing free options for Canadian tax filers for more than a decade.
Product: TurboTax Free
Who it’s for: Anyone can use TurboTax Free as it works on PC or Mac and covers simple to complex tax situations.
Features: TurboTax Free can instantly import tax information from the Canada Revenue Agency with Auto-Fill My Return. The software includes a complete A-Z list of deductions to make it easy for customers to find the deductions that apply to them.
TurboTax Free includes guidance at the topic level to help customers file. For instance, students will be guided through the student section.
A review section provides both suggestions on credits/deductions that may apply to their situation, as well as ones that do apply. The software then guides the customer back through their return and helps them apply the recommendations where appropriate.
TurboTax Free returns are saved in the program for one year, but customers can print the document or save a PDF on their computer.
TLS encryption ensures no one else can access your account, and Multi-Factor Authentication means your account cannot be accessed unless you have access to a device on which you’ve previously signed into your TurboTax account.
Who it’s not for: Tax filers who are looking for a lot of guidance should consider paid products.
TurboTax Free customers who decide they want more guidance can upgrade to a paid option that includes full guidance, interview-based profiling and other features.
For instance, TurboTax Self-Employed is the only software in Canada that is designed specifically for persons with self-employed income and provides expert-guidance specific to these individuals.
TurboTax has been a household name in Canada for more than 20 years and more than 32 million returns have been filed using TurboTax software since 2009 alone.
SimpleTax is the new kid on the block, a tax software provider that believes most people should be able to file their own return and that cost shouldn’t be a barrier to getting your full refund.
Your mileage may vary depending on your personal tax situation, but you can’t argue with the price of these two robust and intuitive free tax software providers.
I read this story about a couple planning their wedding – let’s call them Carl and Vanessa.
Vanessa wanted the ceremony to be held in a park next to a lake, but it would be several kilometres from town. The problem, practical Carl said, was there were no buildings in the vicinity should the weather turn stormy – after all, it was common for violent thunderstorms or hail to occur at that time of year.
Carl suggested that a good site would be his Grandmother’s gorgeously landscaped garden. And, if necessary, the guests could easily run into her large historic home to avoid being struck by lightning or pelted by hail. After much discussion, they did agree on this compromise. The wedding was beautiful, and all had a wonderful time.
As it turned out, the weather was warm and sunny – not a cloud in sight – a fact that Vanessa occasionally mentions to Carl, with some regret that it wasn’t held in the charming lakeside setting.
This story illustrates the importance of finding an acceptable balance of risk and reward. Each choice will have a consequence. When it comes to your money, the key is knowing what that acceptable risk is to you.
Investment Risk and Reward
Take a look at this chart of stock returns for the past thirty years.
You can clearly see that the biggest reward came from U.S. stocks, but that also presented the biggest losses. Look at the roller-coaster ride of Canadian stocks. That’s why investors choose the green line – the balanced portfolio – which gave a comparable return to Canadian stocks over this time period without the same stomach-churning drops.
The most common ratio is 40% fixed income and 60% of a diverse combination of Canadian, US and foreign equities which provides a buffer when the stock market takes a dive and lowers your overall risk.
This shows investors are getting pretty savvy about their long-term investing strategy, but not so much for short term goals.
Safety of principal vs. potential rewards
I hear comments all the time from investors who don’t want to keep emergency funds, or savings for short-term goals in accounts that pay next to nothing when they have a chance of receiving double digit returns by holding equities.
A common retirement strategy is to hold several years worth of cash/cash equivalents for immediate cash flow needs and to ride out any market volatility when people are in the decumulation stage. Recently, financial writers have derided this strategy, stating that holding large amounts of cash can cause a significant drag on returns and make your portfolio non-sustainable in the long term.
So, what’s more important to you in these cases – safety of your principal when you need it, or the hope of higher potential rewards?
Revise your thinking
Instead of bemoaning the hypothetical returns you could be missing, you need to think of your cash savings as the equivalent to an insurance policy.
Like most of us, I have a home insurance policy. For over thirty years I resented paying that annual premium. But, when my basement flooded one year I was very glad I had insurance. It must have cost thousands of dollars to clean up the mess, tear out and replace the drywall and flooring in our 1500 square foot space, as well as replace our furniture and other belongings.
Without insurance that would have come out of our pocket, and it’s very likely we would not have been able to afford to do it all.
Risk of losses is very real. We need to take the necessary steps to reduce our risks to an acceptable and comfortable level, especially with our investments. When your time horizon is short, wouldn’t you rather (wistfully) say, “I could have had a 12% return if this money was in the stock market”, instead of, “I don’t know what I’m going to do. I lost half the money I need right now for my purchase/living expenses.”
I know what I would rather say.