Do it yourself – a concept that always sounds adventurous, scary and fun. To save costs and gain experience, many people are opting for the DIY routine. This can be great for home renovations and other quick fixes; no question about it. But does DIY work for accounting and taxes? Well, yes and no.
The most obvious pro of doing your own taxes is the cost-saving. You save money on professional fees. In some cases, there are individuals with very simple tax situations who feel they are indeed better off to save the money and tackle their taxes on their own. But if you’re a small business owner, beware. Your taxes aren’t as simple as you think.
But here let’s step back a bit. In fact, there are definitely some benefits to doing at least part of the work yourself. One of the biggest is that it gives you a better grip on your finances. You are aware of where every dollar goes. Because you are looking at the realistic picture all the time, you are forced to review and make prudent decisions accordingly.
Getting into the habit of real-time decision-making is another pro of DIY. I often see, when individuals come in to my office on an annual basis, that they have not done any record-keeping at all for the whole year!
By keeping your own records on a regular basis, you are able to make real-time decisions throughout the year that can positively impact your success, now and in the future.
Now let’s look at the cons. The most obvious con of DIY accounting and taxes is that it takes time away from your business. Many individuals feel that they will save on professional fees if they do the work themselves. Sure, okay. What they don’t realize is that they could be using this valuable time to make money in their business, or treat themselves to a well-deserved personal break. The opportunities lost could far outweigh the savings.
Plus, DIY accounting and taxes are prone to errors. Professionals have measures and policies in place, including the software they use, the review processes, policies and procedures – all of which minimize the risk of error.
When a client brings in a tax return they completed themselves the year before, invariably I notice that they have lost out on some valuable deductions. I have had to go back in some cases and redo the prior year to get clients the large refunds that they deserve.
You can see that missing out on valuable tax advice can result in a considerable loss of money in tax savings. Speaking to a professional before making large decisions will ensure that you make the right decisions. It will also structure your decisions in the most tax-effective way.
Lastly, there is the dreaded issue of dealing with Canada Revenue Agency in the event that they have questions about your work, or – horrors – are auditing you. If you have made an error, you are on the hook to deal with CRA on your own. But, if your work was completed by a professional, that professional will step in and facilitate the discussions on your behalf.
So, in sum, what’s the best way to go?
I tell my clients that it’s a combination of DIY accounting, and then enlisting the professionals to clean up their final accounting and complete their taxes.
Also, throughout the year, my clients send me their reporting on a regular schedule that we’ve prepared together beforehand. This ensures that they stay on top of their finances – and that they stay accountable.
Once the accounting is done, I step in to review the accounting, make any critical changes, and complete the tax planning and the taxes. I find that this is the best mix of cost-savings and tax deductions while maximizing refunds.
Again, every client and business is unique and may have different scenarios that work for them. It is best to speak to a professional and discuss what the best mix is for you.
The preceding is for information purposes only. Prior to making decisions, contact your accountant for advice.
Simeen Gaidhar-Bhanji, CA, owns Simeen Bhanji Chartered Accountants, which offers a variety of services to corporations and individuals, ranging from tax planning and consulting, compilation, reviews and audits of financial statements, corporate and personal tax returns, HST services, and consulting for internal control, financing and tax.