Tax software: Making a taxing task less taxing

If there's one thing a computer can do better than anything else, it is to ... well ... compute.

So, it comes as no surprise that computer and net-savvy Canadians have embraced the electronic preparation and filing of income tax returns. These days, a steadily growing number of Canadians choose software programs over hand preparation as their "favourite" way of paying their taxes.

And it's not hard to see why the electronic option is becoming more popular. It's fast, secure, more accurate, and refunds can take as little as eight business days (versus three to six weeks for the paper variety). And the programs effortlessly catch all those new tax credits and benefits that were introduced in 2006 — such as the Canada employment credit, the public transit pass credit, the new textbook credit for students, and the $100 a month universal child care benefit for parents of children under six).

Research has also shown that people who file online tend to get bigger refunds than people who file using pen and paper.

Many people who file their returns electronically use the Canada Revenue Agency's Netfile system. This is the web-based service that allows taxpayers to file their returns over the internet. The much-less popular Telefile option lets those with relatively simple returns file by phone using an interactive computer program. (Efile is the internet-based filing system used by those who prepare tax returns for a living).

The tax department notes that many of the people who use tax software don't actually file their returns over the net. They used the programs to do the data entry and the math but then print them out on paper (a non-electronic substance that derives from trees) and snail-mail them to the revenue folks.

A major computer crash in March 2007 forced the tax department to shut down its Netfile and Efile systems for 10 days. But once the problem was fixed, figures showed the majority of Canadians were still opting for electronic filing.

How to Netfile

You'll need an access code to Netfile your taxes. You can find that on the label sheet of your T1 personal income tax return package. Or you can go online and enter some key data. (You'll need last year's tax return handy for one bit of info). Unfortunately, if you've never filed a tax return before, you won't be able to Netfile.

Once you have the access code, all you need now is a "certified" tax program. The CRA has a list of certified programs on its website.

QUICK FACT

Number of returns filed in 2006

• On paper: 12.7 million
• Netfile: 3.8 million
• Efile: 8.3 million
• Telefile: 600,000

Source: Canada Revenue Agency

At this point, taxpayers have two main options: using software that is loaded on to the computer's hard drive, or using interactive web-based programs.

Some programs can be bought in a store and come on a CD that installs the software on your hard drive. Other programs allow users to download the software directly from the company so you don't even have to head to a store. Some programs offer both versions.

Often, these programs allow you to prepare multiple returns, but are more expensive than the other type of tax programs — the web-based programs where users interactively prepare their returns online without downloading the software on to their computers.

Many software programs are also free for those with low incomes.

Here's a quick look at the particular bells and whistles of some of the most popular tax-preparation programs certified for Netfiling:

Tax software programs

QuickTax

Intuit's QuickTax Desktop is the most popular tax preparation software in Canada. Reviewers tend to like its "Easy Step" interview method for beginners. Available in CD and downloadable versions, it can file a limited number of returns, but an unlimited number can be prepared for those with incomes below $25,000. Standard edition costs $39.99. The $59.99 Platinum version adds retirement planning features and investment-related tax advice. For Windows-based operating systems only.

Ufile for Windows

Like QuickTax, Ufile uses the interview method to lead users through the tax-preparation process. Ufile can be purchased in some electronics stores or it can be downloaded. It costs $29.99 and allows users to prepare up to six returns. For users with incomes below $25,000, an unlimited number of returns can be prepared. For Windows-based operating systems only.

TaxTron Mac or Windows

TaxTron, which uses a "step-by-step" approach, can be bought at several national chains or downloaded from their online store. It is the only box or downloadable program available for both PC and Mac platforms; all others are for PC only. It's free for those with a net income of $30,000 or less. Those earning more must purchase a single-return licence for $12.99 or spend $24.99 for a family pack for up to 10 returns.

TaxWiz Deluxe

This is another product from Intuit, and another program that uses the interview method to guide users through the process. It can file five returns, or an unlimited number for those who make under $25,000. Costs $24.95. Windows only.

QUICK FACT

Deadline for filing 2006 tax returns: Midnight, Monday, April 30, 2007

Penalty for filing late: 5% of tax owing, plus 1% per month

Source: Canada Revenue Agency

Lesser-known downloadable programs include GenuTax, which costs $34.99 for unlimited returns and advertises that all annual updates in future years will be free; StudioTax2006, which is free but asks for voluntary contributions (can't be used by Quebec filers); myTaxExpress, which costs $6.99 for one return and $12.99 for up to 10 returns (free for those with incomes under $25,000); TaxFreeway, which costs $9.95 for unlimited returns; FutureTax, which cost $5.99 for one return, $7.99 for two, and $9.99 for 10, (free for incomes below $25,000); and eTaxCanada2006, which costs $8.99 for each return (also free for those with incomes below $25,000).

Web-based programs (for Windows or Macintosh)

QuickTaxWeb

The online version of QuickTax costs $19.95 for each return. Anyone with a gross household income below $20,000 can use the program free.

Ufile.ca

Ufile's online solution costs $15.95 for the first family member and $24.95 for two family members. Each additional family member is free, as are returns for those who earn less than $25,000.

There are other web-based programs out there that can work out to be cheaper than the two market leaders cited above. AceTax (formerly T1Filer) costs $8.99 for one return; $11.99 for a couple (but takes $2 off for returning customers); WebTax4U.ca costs $11.99 for the first return and $5.99 for each additional family member; SnapTax, also an Intuit product, charges $9.95 per return; CuteTax Online costs $8.98 for one return, $15.98 for two returns, and $18.98 for three to five returns; and EachTax.com, which costs $6.49 for the first return and $3.50 for each additional return (price will go up slightly on March 11).

Of course, you can always do your return the old-fashioned way — by hand, on paper, via Canada Post. You can download all the forms you need from the Canada Revenue Agency's website.