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Deductibility eases tax-preparation pain

(CSN) Even the simplest tax return is no longer simple if you have investment or business income. Turning the job over to an expert does cost money – but the expense is probably deductible

Do you struggle every year to complete your income tax return? Consider hiring a professional tax preparer to handle this unpleasant chore. That way, you leave most of the hassle to an expert who knows the ropes. Such services don't come free, of course, but might cost less than you expect. Depending on your income sources, you should be able to deduct at least a portion of the fee.

The tax law states that all taxpayers, including those who report non-business/property income such as salary or capital gains, may deduct fees or expenses paid for advice or assistance in preparing, instituting, or prosecuting an objection or appeal related to:

  • An assessment of tax, interest or penalties under the federal Income Tax Act or any provincial Income Tax Act.

  • A decision of the Canada Employment and Immigration Commission, the Employment and Insurance Commission, a board of referees, or an umpire under the Employment Insurance Act.

  • Any foreign income tax assessment where the foreign tax is deductible.

  • Or an assessment or decision under the Canada Pension Plan or a provincial pension plan. 

Generally speaking, deduction of fees is not allowed for personal income tax preparation or personal tax planning advice. But if you're self-employed, reasonable expenses incurred for advice and assistance in preparing and filing your tax return are usually deductible under the general rules for expenses paid in the course of earning income.

The bottom line is that if you have numerous investments or business activities to account for, fees for tax return preparation will most likely be entirely deductible. And a reputable tax preparer will have the knowledge and expertise to make sure you take advantage of all deductions and credits available to you. By thus maximizing your tax savings, you could even make more money than you pay out for professional services.

Remember, too, that it’s important to keep accurate, up-to-date records throughout the year. Not only are good records a requirement of the Income Tax Act, they will enhance your tax preparer’s efficiency and ensure that all of your eligible deductions and credits are trapped in your tax return. Detailed records also will support your claims should you ever be audited by CRA. So, forget about the old “shoebox” method of record keeping and switch to a detailed paper record book or one of the many computerized accounting systems now available. It’ll save you money in the long run.

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