Do I need to hire an accountant?

Do I need to hire an accountant?

Paying a professional accountant to prepare and file your tax return is something many families and small businesses consider doing every year. Some have relied on the same trusted accountant for decades. Some start using the same accountant their parents have always used. Some engage an accountant simply because they are forced to due to serious CRA debt issues.

Deciding to hire an accountant is a big decision, no matter what the reason is. The fees you pay an accountant every year could potentially go towards other important purchases like car payments and daycare, as well as savings for retirement or your children’s education. With that said, there are a number of benefits – both financial and non-financial – to using a professional accountant to prepare and file your tax returns.

First, what is a professional accountant?

A professional accountant has the word “professional” right in their designation – Chartered Professional Accountant, or CPA for short. Look for the CPA designation on a business card and website after the person’s name (if they do not have a business card or website…move on). You can also Google ‘CPA Ontario Directory’ to search for any CPA Member currently in good standing in Ontario.

The CPA designation is the pre-eminent, globally-respected business and accounting designation. It’s not about the secret handshake – it’s the amount of formal education, training, testing and experience needed to earn the three letters, CPA. You can be assured that someone with this designation has the knowledge and experience required to handle your accounting and tax issues and filing needs.

CPAs are also held to a higher standard than non-professional accountants and bookkeepers. All Members must adhere to a strict Code of Conduct, perform a minimum amount of professional development every year, and are subject to professional oversight and regular inspections by their Provincial institute.

Operate a business? You need an accountant (unless you are one…do we know each other?)

For starters, if you own and operate your own business, engaging an accountant is a necessity. This is particularly true if the business is incorporated as the levels of tax complexities are quite a bit higher when there is a corporate entity involved. Long-term tax planning is crucial for corporations and their shareholders, including annual salary vs. dividend decisions, bonus accruals, capital gains exemptions and succession planning.

There are also sales tax issues to contend with, especially if sales are being made across provincial borders or overseas. Given CRA’s propensity for reviewing and auditing HST returns filed by small businesses, these are matters best left to a professional with experience in the various forms of sales tax across North America and with CRA’s Excise Tax Act.

It may be more expensive NOT to hire an accountant

Engaging an accountant to prepare and file the various tax returns required of a business/corporation in Canada has one main financial benefit – maximizing allowable deductions and minimizing your tax liabilities. A professional accountant will ensure your return has every deduction you are entitled to.

A professional accountant will also ensure owner/operator salaries and dividends are accrued and paid out in a way that attracts the least amount of income tax combined for a corporation and the personal shareholders. Given the recent tax law changes brought in by the federal government, on top of the countless other tax laws already in place, the amount of tax savings over the long-term could easily be in the tens of thousands of dollars, even for a very small business.

Additional benefits

Another benefit to paying an accountant to prepare and file your tax return if you operate a business is the fact that you can deduct the accountant’s fees as a business expense which reduces the net cost. Unfortunately, most individuals cannot deduct the fees they pay their accountant to file their personal tax return (though there are some exceptions). However, there are many other benefits to using a professional accountant to file your personal tax return:

  • It saves a lot of time and effort – spend your time doing things you actually enjoy doing!
  • It will help put your mind at ease – get more sleep by not worrying about which credit or deduction you may have forgotten to claim.
  • If CRA has questions or wants to review your receipts and slips, they will ask the accountant first as the authorized representative that e-filed your return. This saves you even more time and effort.
  • You will get your tax refund much quicker – professional accountants have their own e-file system with CRA which allows tax returns filed by accountants to be processed quicker.
  • If you are faced with a CRA audit, your accountant can help facilitate the audit and act as a liaison with the CRA auditor.
  • If a prior year T1 adjustment is needed, your accountant can file it online very quickly.
  • CRA will often respond more favourably to a professional accountant when correspondence is required, compared to dealing directly with the taxpayer.
  • No need to purchase your own tax software every year.
  • Free coffee and pens!

If you do decide to hire a professional accountant to look after your tax needs, give me a call or email. More importantly, make sure you choose someone you trust as you will be relying on this person for many years and will be providing them with your most confidential information on a yearly basis. Along with your financial advisor and lawyer, your accountant will form part of your team of trusted advisors. Your accountant, with permission, can also correspond directly with your financial advisor and lawyer if certain information is required like the original cost of investments sold during a year.

*The blogs posted on this website provide information of a general nature and should not be considered specific advice. Please contact a professional accountant prior to acting upon or implementing any of the information included in the blogs.

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