Tax Return Software in Canada: A Simple Guide

Filing taxes in Canada doesn’t have to feel like you’re braving the cold Arctic tundra alone. With the right tax return software, it can be as smooth and comforting as a warm cup of maple syrup.

Our simple guide is here to light the way through the forest of tax software options, providing you with the tools you need to file your taxes with ease, accuracy, and maybe even a little joy.

Let’s dive in!

What Is A Tax Return?

A tax return is a form or form filed with a tax authority that reports income, expenses, and other pertinent tax information.

Tax returns allow taxpayers to calculate their tax liability, schedule tax payments, or request refunds for the overpayment of taxes.

In most countries, tax returns must be filed annually for an individual or business with reportable income, including wages, interest, dividends, capital gains, or other profits.

All personal tax returns have a central section which contains common types of income, such as bank interest or dividends received, and expected tax reliefs, such as donations to charities.

Other types of income, such as profits from self-employment or salary from a job, are reported in separate sections.

Not all income has to go on a personal tax return; for example, if you have money in an ISA, you do not need to include interest earned because ISA interest is tax-free.

Understanding Tax Refunds

It can be exciting to get a large tax refund. You can expect a refund if you overpaid your taxes during the year.

This generally happens when taxes are deducted from your paycheck every time you get paid by your employer.

Here are some reasons why a taxpayer might get a refund:

  1. The taxpayer should have filled out Form W-4, which estimates the correct withholding amount from the employee’s paycheck.
  2. The taxpayer intentionally fills out their W-4 for a higher withholding and larger tax refund at tax time.
  3. The taxpayer should have updated their W-4 to reflect a change of circumstances, such as the birth of a child and an additional child tax credit (CTC).
  4. A freelancer or self-employed person who files quarterly estimated taxes may overpay to avoid a surprise tax bill or underpayment penalties at tax time.
  5. The taxpayer is eligible for refundable tax credits, which can reduce the taxes owed below $0. In other words, if the credit exceeds your tax bill, you will receive a refund for the difference.

Tax refunds are the opposite of a tax bill, which refers to taxes owed by a taxpayer.

In the case of a tax bill, you owe more taxes to the government than you paid during the year. You usually have a tax bill if your employer doesn’t withhold enough taxes from your paycheck.

What Are Refundable Tax Credits?

Most tax credits are nonrefundable, meaning that the tax credit can only reduce a taxpayer’s liability to $0.

The taxpayer automatically forfeits any remaining amount from a nonrefundable nonrefundable tax credit. For this reason, this type of tax credit is sometimes called a waste tax credit.

In contrast, a refundable tax credit pays out in full, meaning that a taxpayer is entitled to the entire amount of the credit regardless of their income or tax liability.

If the tax credit reduces the tax liability to below $0, the taxpayer gets a refund.

Refundable tax credits include:

Child Tax Credit (CTC)

The child tax credit is $2,000 maximum for eligible taxpayers. The fully refundable portion is $1,600 for 2023 and $1,700 for 2024.

Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) gives low– and moderate-income workers and families a tax break.

The credit is $7,430 in 2023 and $7,830 in 2024. The amount of credit a taxpayer receives depends on their income, filing status, and the number of children.

For example, eligible taxpayers without children will receive $600 for tax year 2023. That figure increases to $632 for tax year 2024.

Premium Tax Credit (PTC)

Low- and moderate-income households may qualify for the premium tax credit (PTC), which lowers the monthly premiums for health plans offered through the federal and state health benefit exchanges.

Taxpayers can use all, some, or none of their PTC in advance (i.e., upfront). If taxpayers use less PTC than they qualify for, they will get the difference as a taxable credit.

What Are The Benefits Of Filing Taxes Online?

Filing your taxes online can be beneficial for a few reasons. For one, you can complete the process relatively quickly and receive an almost immediate confirmation that your filing has been submitted and accepted. 

Electronic filing is preferred because, well, it’s not 1993.

The CRA’s mobile app allows you to view your return status, change your address, update your direct deposit information, view RRSP and TFSA contribution limits and update your marital status on your mobile device.

You could also get information about the status of your return via telephone if you have the patience for that. 

However, if you don’t file electronically, it could take longer for this information to appear in your account, along with related updates.

Another reason you’d want to file online is that the interfaces or online applications that file on your behalf can make the tax filing process much easier and reduce the chance of errors. 

For instance, software like TurboTax or Wealthsimple Tax (we’re partial to the latter) can help you get the most accurate results while maximising the amount of your return. 

Plus, you only need to send receipts with your online filing if the CRA requests them later.

Finally, filing online means you’ll get your refund faster. You may receive your refund with direct deposit in as little as 2 weeks.

What Are The Key Dates To Remember?

Before you file your taxes, you should be aware of key dates:

  • April 30, 2024: Deadline to file your taxes
  • June 15, 2024: Deadline to file your taxes if you or your spouse or common-law partner are self-employed

The payment date for 2024 taxes

Tax payments are on April 30, 2024 — although you have until the next business day if that’s a Sunday.

How To Prepare Supporting Documentation?

Much of the supporting documentation you’ll need to file your taxes online should arrive by the end of February, if not well before. 

Suppose you start your online filing without this information. In that case, you’ll need more essential data points and details about your income, expenses, deductions, credits, etc., and you won’t be able to proceed. 

Some tax software will allow you to enter some information and save your return for a later time when you can enter the rest.

Here are some familiar income sources you may need to account for when filing your taxes:

Income

If you are required to file taxes in Canada, you may have one or more types of income to report. Here’s a list of the types of income you’ll need to report according to the Canada Revenue Agency website:

Employment and self-employment income

This income is related to employment and self-employment, including commissions and foreign employment income.

Pension and savings plan income.

This is pension and savings plan income like old age security, CPP or QPP benefits, or pensions from other countries.

Investment Income

This is income earned through investments like interest, dividends, and capital gains.

Benefit income

This includes benefit income from EI and other benefits, workers’ compensation benefits, social assistance payments, or UCCB.

Claim deductions, expenses, and credits

There are many deductions and expenses that you can use to reduce your taxable income (and any tax payments due as a result). 

Some credits can reduce the tax amount you owe. Some, called nonrefundable nonrefundable credits, can only reduce your taxes to zero. 

Others, called refundable credits, can be refunded to you. Here are some standard deductions and credits you may be eligible for:

Deductions

  • Registered Pension Plan (RPP)
  • Registered Retirement Savings Plan (RRSP) Deduction
  • Deduction for an Elected Split-Pension Amount
  • Union, Professional, or Like Dues
  • Child Care Expenses
  • ​​Disability Supports Deduction
  • Business Investment Loss (ABIL)
  • Moving Expenses
  • Support Payments Made
  • Exploration and Development Expenses
  • Other Employment Expenses
  • Clergy Residence Deduction
  • Other Deductions
  • Canadian Forces Personnel and Police Deduction
  • Security Options Deductions
  • Limited Partnership Losses of Other Years
  • Non-Capital Losses of Other Years
  • Capital Gains Deduction
  • Northern Residents Deductions
  • Carrying Charges and Interest Expenses

Nonrefundable credits

  • Basic Personal Amount (BPA)
  • Age Amount
  • Spouse or Common-law Partner Amount
  • Amount for an Eligible Dependent
  • Canada Caregiver Credit or Amount
  • Volunteer Firefighters’ Amount
  • The Home Buyers Amount
  • Home Accessibility Expenses
  • Adoption Expenses
  • Disability Amount for Self
  • Disability Amount Transferred from a Dependant
  • Interest Paid on Your Student Loans
  • Tuition, Education, and Textbook Amounts
  • Tuition Amounts Transferred From a Child
  • Eligible Medical Expenses
  • Donations and Gifts
  • Provincial or Territorial Tax Credits

How To Determine Filing Your Taxes?

Now that you are ready to file your taxes online, you must determine how to complete the online filing process. 

There are several ways to file provincial and federal taxes with the CRA. (You may have to follow additional instructions for filing in Quebec.)

To file your taxes online, you must file using a NETFILE-certified (or, in Quebec, Netfile-certified) tax software platform.

In many cases, you can even use these programs to file your tax returns for free.

If you’ve filed taxes at least once since 2017, your information should be stored in the CRA’s database and retrievable by any NETFILE-certified tax software. 

If you are signed up for a CRA My Account, you should also be able to pre-populate your tax info using Auto-fill My Return.

It’s important to know that not all tax software is certified for all years.

What Is The Best Free Tax Software In Canada?

Regarding tax software available to Canadians, there’s no lack of choice. Not long ago, on the tax deadline, last-minute tax filers would rush to the post office to get their envelopes in before midnight.

Preparing and filing your taxes online for free or at a reasonable price is easy today. The CRA makes it easy to file online. 

87.5% of Canadian taxpayers did just that in 2018! The CRA certifies all NETFILE-certified tax software. 

Using the auto-fill feature, you can even import your tax slips from the CRA into any NETFILE-certified product.

If you’re self-employed or a small business owner, you might need more than free software options. 

So, you’ll need to choose based on your personal tax needs. You might need support for business deductions, such as mileage expenses, when you drive a car for business. More on that later.

Free income tax software could be a good option if your tax situation is essential. Free programs are suitable for people with simple needs, such as students or salaried employees with one source of income.

  1. TurboTax Free

TurboTax (TT) has been Canada’s leading tax preparation software for years. Their free and paid versions are straightforward to use.

Pros

✅ TT uses a series of questions to guide you. TT’s free version might suit you if you’re a student or have a basic tax situation.

✅ Includes some of the intuitive features from TT’s paid versions.

Cons

❌ The free version might be better if your situation is more complex. It only does basic checks.

❌ TurboTax Free versions don’t import the previous year’s data. You’ll have to key in more information at tax time. 

You can use a paid version of TT or other free software, such as SimpleTax, to save yourself the trouble.

❌ The desktop version of TT limits you to two tax returns. You’ll have to use the online version if you need more (for a child or parent).

❌ TT paid versions provide advanced guidance and step-by-step instructions for investment income, rental properties, business income, deductions and capital expenses.

❌ Despite its popularity, TurboTax bombards users with in-app upgrade prompts. They’re annoying, but there’s a way to turn them off.

TurboTax paid versions: Key features.

  • Three online single-return versions and four downloadable versions let you file several returns. Costs range from $15 (basic version, four returns) to $120 (Home and Business version, 12 returns)
  • Live assistance with tax professionals who help answer your questions
  • Available tax preparation service for a per-return fee of $99-$129
  • An online community, tax experts and other live support options

Critical features of paid versions include a detailed interview and an “easy-step” process. They walk you through inputting your amounts and explain eligible deductions.

Paid online options range from $20 to $60 per return, depending on how much guidance you need. 

With desktop versions, you can file up to 12 returns. Prices range from $15 to $120. The most popular version of TurboTax is the desktop Standard version, which is $35. You can file up to 8 returns, which is a good option for families.

Get started with TurboTax 🔥

  1. Ufile Free

Ufile is free of charge to students, regardless of their income, through the Canadian Federation of Students. 

Users can also get it for free via filing a tax return under specific conditions: have just moved to Canada and are filing their first federal tax return, or live with a total family income under $20,000 per year. 

Otherwise, the file starts at $19.95. It is available in Quebec.

Ufile can be assessed from a Windows or Mac computer and most tablets and smartphones. 

There is also an installable Windows app version that doesn’t need to be opened in a browser. It provides you with:

  • The Refile system for adjusting your sent returns.
  • Excellent security and safety features.
  • A higher level of accuracy in your tax results and filings
  • Netfile certification

Get started with agile 🔥

  1. WealthSimple

Wealthsimple is a ‘pay what you want’ option, making it one of the best tax software options for people without much spare income. 

It offers only a single form of Wealthsimple, although users can donate in tiers of between $0 and $49 after filing a return if they choose to. 

It offers:

  • Up to 20 returns per account
  • Full private encryption
  • Auto-fill My return, certified by the CRA
  • Step-by-step support and guidance
  • A high level of accuracy
  • A maximum refund system  

Get started with WealthSimple 🔥

  1. StudioTax

StudioTax is another 100% free program for Windows and Mac devices, although not for smartphones or tablets. 

It is available in Quebec. It uses the NETFILE tax filing system and gives you:

  • An internet connection is only necessary for added security.
  • NETFILE-certified.
  • Up to 20 returns per year.
  • No income restriction details

Get started with StudioTax 🔥

  1. CloudTax

Cloudtax is a non-business tax return software certified by the CRA. 

There are two tiers: Cloudtax Free and CloudTax Pro. CloudTax Free provides you with:

  • Optional audit protection ($2.99 per month)
  • Online tax return storage
  • Great encryption
  • mobile and web access
  • unlimited chat
  • auto-fill my return features

Get started with CloudTax 🔥

  1. AdvTax

AdvTax is available on computers, smartphones and tablets. It supports multiple languages, namely English, French and Chinese. The primary tier, which is unrestricted, gives you.

  • NETFILE certified features
  • An easy-to-use interface
  • Quick five-minute tax return processes

Get started with AdvTax 🔥

  1. GenuTax

Genutax is another NETFILE-certified piece of tax return software that comes as an installer on Windows computers. It is entirely free, but users can donate. 

It gives you:

  • 20 tax returns per year
  • Limited customer service features

Get started with GenuTax 🔥

Which Is The Best Amongst All These Sites?

The best tax software depends on your needs and whether or not you are prepared to pay for tax filing features. 

Either way, Canada has plenty of tax filing software options, some cheaper or more effective than others. 

Whatever you choose, it shouldn’t take long to file taxes since this tax filing software skips a large part of the process and removes any paper documents that would be needed.

Remember that you will still have to do your tax returns unless you hire an accountant or agency to manage it. 

This means you will want to keep track of the tax return dates and ensure you are ready to submit it when needed. 

Some of this software cuts the tax filing process to under ten minutes, so there isn’t as much of an excuse for not doing it.

Conclusion

And there you have it—a journey through the landscape of Canadian tax return software that didn’t require a sled dog team to navigate. Armed with the knowledge from our guide, you’re now equipped to tackle your tax returns with confidence and precision.

The right software can transform tax season from a daunting expedition into a pleasant stroll through a maple grove. Here’s to a hassle-free tax filing experience.

Good luck filing!

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