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April 04, 2021

Canadians are DIYs when it comes to taxes

Tax formsMany Canadians are becoming quite capable "Do-It-Yourselfers" (DIYs) when tackling home improvements.

But it's not only renovation projects they're undertaking on their own... they also prefer doing their taxes that way too.

According to a new report from BMO Nesbitt Burns, almost half of Canadians polled prefer preparing their own income tax returns rather than have someone else do it for them.

And, about 35 per cent have indicated they will be using tax software to help them get the job done.

The report revealed that Canadians are actually quite responsible when it comes to filing their income tax with 94 per cent stating they file a personal income tax every year.

In fact, Canadians paid more than $119 billion in federal income tax in 2012.

John Waters, Vice President, Head of Tax & Estate Planning, BMO Nesbitt Burns, says, "It's commendable that the overwhelming majority of Canadians are doing the responsible thing and filing annually.

"It's not only the responsible thing to do, but also the smart option given the penalties that you can incur should you owe money and don't file."

However, he notes that while it is encouraging that so many people are choosing to prepare their own taxes, some just may be missing out on valuable tax savings that are available to them.

For instance, when asked about their level of knowledge on how various investments are handled from a tax perspective, 58 per cent of those polled were unsure how capital gains are taxed; while two-thirds did not understand how dividend income is taxed.

The study also revealed that many Canadians lack tax knowledge regarding charitable donations, Registered Retirement Savings Plans (RRSPs); and Tax Free Savings Accounts (TFSAs).

"While many Canadians are familiar with the basics of tax preparation, there appears to be a knowledge gap -- particularly on investment income," explains Waters. "If you prepare your own return, ensure you become as familiar as possible with the tax system so you can spot opportunities to reduce the amount of tax you pay and determine strategies for next year and beyond."

So dig in. Do your research. And brush up on your income tax know-how. And just like with any do-it-yourself home project -- if you're not sure how, ask a professional.

By Donna Donaldson, MSN Money

Are you a Do-It-Yourselfer (DIY) when it comes to preparing your income tax? Why or why not?






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