Help me figure out how to pay taxes in Ontario.
February 7, 2011 6:08 PM   Subscribe

It's income tax time in Ontario, and I've never filed before. Help me get through this as cheaply as possible, won't you?

I live in Ontario, and I'm self-employed. In 2008 and early 2009 I was a student, with no income, taxable or otherwise. In late 2009 and throughout 2010, I've been making money, but not much. Probably less than $10,000 per year, gross. (I expect to make a little more in 2011, but we'll see.)

This is the first year I'm filing income taxes, which yes I realize is not ideal. I should have been on top of this in previous years, but I could never get past the stage of reading the CRA's "guide"--in quotation marks because I would argue that it provides little in the way of actual guidance. Or at least doesn't provide it in a language I can understand.

I went to H & R Block earlier today and sat down with an accountant, and he told me that it would be possible to file all my missed returns simultaneously with this year's. But then he told me that to do all this for me, he'd need a minimum of $360, and quite possibly more. He quoted me $150 to $200 for each year of self-employment, plus $30 per year for my unfiled student taxes.

AskMe, I'm not even sure I have the money to pay my taxes, let alone to pay this guy to do them. I definitely will pay him if it's the only way to get this done without going back to the "guide," but I'm thinking there has to be a middle path. Surely somewhere on the web there's a succinct, well-written explanation of how to file income taxes in Canada, or in Ontario. Or maybe someone knows for a fact that I could find a less expensive accountant elsewhere.

Please help me make things right with the CRA without spending too much of what little money I have. I don't want to be thrown in some kind of weird debtors prison.
posted by AAAA to Work & Money (17 answers total) 5 users marked this as a favorite
You're not legally required to file taxes if you don't owe money. You almost certainly don't owe any money, due to your low income and unused student credits from previous years. However, there are benefits of doing so--namely, easy voter registration and GST/HST credits. Honestly, I think that if the guide scares you, you should pay a professional to file your taxes for you. You'll save money in the long run because they'll help you carry forward as many tax credits as possible, reducing tax burdens in future years.
posted by smorange at 6:25 PM on February 7, 2011 [2 favorites]

Paying taxes in Ontario is pretty easy. How much you'll have to pay really comes down to how much you've been making. If it's only $10k per year then it would be next to nothing. If you take your student years into account (you can claim tuition and related expenses and they carry forward five years) then you are most likely paying nothing from 2008 onwards.

The paper forms that CRA sends out are actually fairly straightforward. What is even easier is if you can pick up some software as it will populate all the relevant fields and do the necessary calculations by itself. Software is fairly inexpensive, like $25, and may even have previous years in it. If not, then it shouldn't be too expensive to acquire some software from previous years. It is entirely possible that you have a friend who already has the software and has a couple of extra returns they haven't used (the software generally gives you a fixed amount of returns it can process).
posted by any portmanteau in a storm at 6:36 PM on February 7, 2011

Turbo Tax software has online versions for 2009 & 2010 that you can try for free and may qualify for the free version.
posted by canoehead at 6:38 PM on February 7, 2011 [2 favorites]

The traditional cheapest way is to sit down with the guide and a parent, SO or trusted friend and get them to help you go through it. Filing the simplified form, as you will almost certainly do, will take about 20 minutes, if you only have a few T4s. There is a better way now though.

Try the Turbotax website. They have a program by which students can file with their software for free---the link is right at the bottom centre of the page. It sounds like you would qualify. Turbotax is really easy to use. They tell you exactly what bits of paper you need, what to enter and can file your return electronically. You don't even need a stamp. The downside is that you're giving Intuit all your financial and personal info, but I've been using them for 15 years without a problem.

It's absolutely worth your time. If you have no taxable income after deductions, you should get a couple of hundred bucks for the GST refund at least.

Those prices from H and R Block are a total scam. He knows you're only worth $300 or so for your GST/HST refund and is angling to get it all. I think that's a bad deal. H&RBlock is worth it if you have to file as a contractor or sole proprietorship or have a lot of investment income. That's not you though.
posted by bonehead at 6:46 PM on February 7, 2011 [1 favorite]

You probably don't have to file taxes because you probably don't have to pay any, but I wouldn't bet the bank on "probably". This list from the CRA outlines when they do and don't expect you to file a tax form.

If you've been earning as little as you say, there's a fair chance you will actually get some money back. And while online tools are cool, if your income and tax situation are pretty straightforward, the paper forms are fine if you can't use the free Turbotax online app.

The CRA has an online course that walks you through everything you need to know about paying taxes in Canada. You have to register with an email address, and they say it's just for statistical purposes and won't be tracked, but I suspect a fair number of gmail addresses are showing up in their database.
posted by maudlin at 6:49 PM on February 7, 2011

Response by poster: Yeah, but what worries me about using software is that I'm self-employed, and have been for the past two years. Because of that, I don't have any T4s--just my own invoices that I've sent to various clients.

Will the software still be okay for me to use if all I know is my gross income? (Since I'm a freelancer, I've never had any taxes automatically deducted from a paycheck, by the by.)
posted by AAAA at 6:55 PM on February 7, 2011

This doesn't speak to your most recent question, but:

If you make as little money as you say, and if you rent or own a place of residence, you will most likely get $250 for a property tax credit and $100 for a sales tax credit (see here) in addition to any GST/HST credit. Per year. Such are the benefits of filing whilst poor. (You may, however, have lost your chance at these for not filing in previous years. I'm not sure, though -- I've always filed as a student in ON and always received said credits).
posted by astrochimp at 7:07 PM on February 7, 2011

I use UFile software, similar to Turbotax and the like, and there is definitely a form for reporting self-employment income and associated expenses (T2125).
posted by maudlin at 7:07 PM on February 7, 2011

You can almost certainly use the free student edition for 2008. You might get away with it for 2009. For 2010 you may need to use the unincorporated Business edition. It's worth doing that if you have any deductions for your business at all. You know, for instance, that if you work from home, that you can write off a portion of your rent and utilities, right? That can be a bit tricky, and, in my experience, the tax software is well worth it.

Turbotax in previous years has allowed you to fill in the form for free. You only need to pay just before you print or submit your return. There's no cost to you (other than time) to give it a try.
posted by bonehead at 7:09 PM on February 7, 2011

Perhaps you can drop by a free volunteer tax preparation clinic? I'm not Canadian so I don't know the scope of what's involved here, but it seems they could at least point you in the right direction and give some advice even if your situation is too complicated for them to do it all for you. Apparently, the Chartered Accountants in Ontario also have a program so it might be worth making an appointment with them. It looks like you qualify within the income guidelines.
posted by zachlipton at 7:10 PM on February 7, 2011 [1 favorite]

Forget H&R Block, what a ripoff. I have used uFile for years (and it's free if you make under $20,000 a year). It's really easy to use. You put in the amounts and the software does the math for you. When you're finished your return, you can file it on the CRA website.

Like any portmanteau in a storm said above, don't forget to claim your tuition credits, even those from past years. You will need Form T2202A and you can get those from your school (ours were available through our school's student web).

FWIW, when I was a student making under ten grand a year, I skipped filing my taxes for a while and was terrified of the consequences. Finally, I did it and filed for two years at the same time and my laziness was rewarded with a $1,000 return and two years' worth of GST cheques...woo hoo!
posted by futureisunwritten at 7:35 PM on February 7, 2011

Oh yeah, I forgot about the free version of UFile. Yes, definitely try that. They'll let you NETFILE free, too. And they are set up so you can file for as far back as 1999.
posted by maudlin at 7:40 PM on February 7, 2011

If I were you I'd go with the oldschool paper forms.

Here is the important thing to remember - anything you send in is better than nothing, and they will either a) fix your mistakes or b) ask you for more info.

Once you get the ball rolling things will start taking care of themselves (and you'll feel oh so much better about it all)
posted by davey_darling at 8:47 PM on February 7, 2011

uFile is also smart enough to manage your student credits and apply only enough of it that will help you for the current year and bank the rest for the future.

Yeah, uFile has been free for students for a long time and is quite easy to use. If it's free if you gross <$20k, that's freaking fantastic! I don't know if any of the free student codes are retroactive or not.

This will probably take you a ton of time since you haven't filed in a long time, so I'd get started earlier rather than later. The last few years (as a student), it usually takes me an hour or two, every year. Pretty easy, cut & dry.

I don't know where you went to school, but the first thing to do is remember/find your login/password for your online student account (if your school has one) to access your credits and tuition summaries. My school has all of the forms and whatnot online and the past ones are archived and available for download/printing.

/thanks for reminding me to do my taxes (hey, I finally got around to applying for my first student loan)

//which made me realize that I've been in full-time post-secondary for >144 months

posted by porpoise at 9:36 PM on February 7, 2011

>Will the software still be okay for me to use if all I know is my gross income?

Definitely, any software you use will have a place to enter the revenue you received and any expenses you incurred to earn that revenue. It will do all the rest , such as calculate any CPP that is payable, etc.
posted by canoehead at 7:15 AM on February 8, 2011

Response by poster: Okay!

I tried UFile, and it seems to think that I'm owed approximately $400 net over the four years, despite the fact that I've never paid taxes.

I just got off the phone with the CRA and they told me that this could very well be the case. I'm going to send in my forms and pray that they don't come after me.

Thanks to all who suggested using software. This money, while it does seem almost too good to be true, will be useful.
posted by AAAA at 11:20 AM on February 8, 2011

Studio Tax is free and worked for me.
posted by rumbles at 8:50 PM on February 8, 2011

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