Thursday, 8 April 2010

Review and Ratings of Canadian Online Tax Software: 2009 Taxes Edition

Preparing a Canadian income tax return online through a web browser for subsequent filing electronically via the Canada Revenue Agency's NetFile program has been a real boon for the convenience and for the speed of the refund. Though there are also NetFile-capable tax prep packages that can be downloaded onto a home computer, this review focuses on the web packages only.

It has been a time-consuming job trying out every one of the twelve web tax preparation packages certified for NetFile by the Canada Revenue Agency. Entering the same tax data over and over has been a revealing and at times frustrating task.

Ratings Method: total score out of 45 max points on 5 factors
  1. Privacy and security (10 points) - How well does the online tax prep company protect your data and your privacy? What do they promise and what evidence is there of their capability to deliver? Unfortunately, this is the weakest area of the ratings - my numbers could be fairly wide of the mark - since it is hard to get much tangible proof of the reality vs the promises made, even compared to the minimal promises as are publicly made on the websites. Only one company (Acetax) actually claims to have been audited by an external party. CRA does not do anything, so far as I am aware, to check up on the companies and how they handle our data, which I think is shocking and unacceptable, given that a lot of people likely believe that NetFile certification somehow gives assurance of security protection.
  2. Flow, readability and layout (10 points) - How does the appearance and the flow of the program guide the taxpayer through all the steps, ensuring that everything is entered correctly in the right places? Is it easy to go back and forth, to review results and check one's work or make changes? The programs vary enormously on this factor, from simple on-screen versions of the paper forms, which merely do the arithmetic correctly and transfer amounts (or are supposed to!) between forms, to sophisticated interview processes akin to interaction with an accountant, asking questions to uncover all income and deductions and credits.
  3. Help (10 points) - How much access to explanations about tax rules is provided and how well placed is it? One of my pet peeve test items this year is the infamous T1135 Foreign Income Verification Statement which a taxpayer with foreign property over $100,000 in cost must fill in, sign and send in to CRA. Does the program tell you, ideally at the point when you have to tick that box, that it is not required for foreign holdings within registered accounts like RRSPs? Some do not say so and others do not say that the T1135, if required, cannot be done online and that it must be submitted by mail on paper.
  4. Responsiveness (5 points) - How fast is the online application at saving data and refreshing the screen? slow = frustration! Well done to QuickTax for a major improvement in upping its speed to acceptable levels this year.
  5. Accuracy (10 points) - new rating factor this year! How good a job does the program do at calculating your taxes and helping you legally pay the least amount? For those who think that NetFile certification means the programs will all come up with the same answer (as I believed myself before starting to look at all these packages a few years ago), it is time to recognize the reality. As I commented last year, CRA's certification only means the program is correctly including all the revenues. the programs differ enormously in their ability to automatically detect and claim all deductions and credits to which you are entitled. As a result, in my own case with all the packages my total income on line 150 was identical but balance owing on line 485 showed five different amounts, one of which was a few thousand dollars different (impossibly wrong) and the others anywhere from a few dollars to a few hundred dollars apart. The very best package (TaxChopper) at using deductions and credits for an individual and/or shared amongst family members is like having an skilled accountant doing your taxes - it is essentially an expert system for income tax. Three examples tested the packages' ability to optimize using age amounts and pension splitting, tuition and education transfers, foreign tax credits with inter-provincial residence thrown in for the trickiest rule. In no case did any other package beat TaxChopper - it always found deductions, transfers and credits to use and end up with the lowest taxes to pay. The difference on a potential $4700 tax bill was about $500. Optimization can be very worthwhile.


Highly Recommended
#1 UFile and TaxChopper - tied with 38 points.
Both are outstanding programs but excel at different things.

UFile - "Polished, easy to use and handles all but the more sophisticated tax reduction optimizations".

TaxChopper - "An expert system for income tax – Delivers on the biggest refund / lowest tax to pay promise"

#3 H&R Block - 34 points "Technically, it's UFile but it has a few undesirable privacy features of its own"

#4 QuickTax - 33 points "Guidance every step of the way with plenty of questions, reminders and some useful suggestions for future tax planning"

#5 Acetax - 32 points "For those who need minimal help and are familiar with tax forms"

Merely OK
#6 WebTax4U and - tied with 26 points
WebTax4U "For those who know where things go and are familiar with tax forms" "OK package if you know what forms to fill and credits to claim."

#8 EachTax - 22 points "Looks like the forms. Not much more than a spreadsheet with colours."

#9 MBOTax and eTaxCanada - tied with 21 points
MBOTax "It's like working with the paper forms except amounts get transferred automatically and arithmetic is done correctly."

eTaxCanada "Still looks like a beta version – Too many rough edges, not intuitive and some key omissions and errors"

Not Recommended
#11 FileTaxOnline - 16 points - "Not recommended – too many weaknesses, some fatal"

#12 5dollartax -2 points - "Crude, half-finished effort, not worth using."

I would highly recommend taking the trouble to enter your data into at least two of the top packages to see if the results match. You do not even need to pay the fee before seeing the end result and enough detail to figure out where one likely differs from the other, which could be due to your input error or to package optimization differences. Once you've fixed the errors, you can see which package gets you the most back.

Wikipedia's tax software page has a list of prices, freebies and limitations (e.g. ones not offering Québec provincial returns) for the various packages in a single table.


John said...

Over a few days I really tried to enter 3 returns in 5dollartax. But their server responded 'operation failed - try again later' so much that I gave up.

Then I successfully netfiled with No complaints - all the line item amounts eachtax calculated matched the values in my OpenOffice spreadsheet (7 years ago or so I wrote an OO macro program to calculate my return). So that gave me sufficient validation.

For fun, sometime I will see what UFile and TaxChopper calculate, as to submit a revised return online with the CRA is not difficult.

Wayne said...

I used Netfile using myTaxExpress. My overall impression was satisfactory but I would like to know how it compared to these programs.

walter said...

Howdy -

curious as to why again this year you have decided not to review TaxTron

Anonymous said...

I have used GenuTAX for three years now. I found it easy enough to use. I think it is the best value for the money. You pay under $40.00 and each year updates are free. I am surprised in did not make your list of 12.

CanadianInvestor said...

Wayne, Walter, Anon, those other programs are all ones that you download onto your PC, which this review did not attempt to cover - too many programs to cover, help! Another issue is that it is a bit hard to compare and rate on-PC vs online for security and privacy. It is not at all a foregone conclusion that one method is better than the other. hmmm, there's another blog post I could do. The original reason I've focused on web packages is that I use Ubuntu Linux as my prime PC system and there are no download versions for Linux.

welsford said...

Intuit's QuickTax is not available (except on-line) for Apple Computers !

Anonymous said...

If you are going to review downloadable tax software then FutureTax is another good package to include in the review.

Anonymous said...

Thanks for the rating, this is helpful, it would be good to include price as a rating as well.

Anonymous said...

Good on the Globe for the usual "born yesterday" tax software review. However, left out what for many is the main things: year to year durability and reliability. Starting in the early 1990s I filed returns on four different major Canadian platforms that (only luckily) ended up being finally (?) bought up by QuickTax. If you've invested time and effort into small business tax software expecting it to reliably import and process all the cumulative filings over years, be careful.

drmcq said...

I have been using StudioTax for several years, and it has done a great job for me.

interested said...

I go with the guy who uses a spreadsheet. I set mine up a number of years ago with my husband's column next to mine so I can see what happens when we mix or match deductions. It imports amounts from schedules and calculates and CCRA has never had a problem with my submissions. I use the guide as I enter the information and am able to add new lines for deductions with no problem. Why spend the $$$

CanadianInvestor said...

> interested, I used to use my own self-built spreadsheet too and it does the calculations correctly but finding and optimizing the deductions is an extra-special added value that I, despite my layman's interest in tax matters, cannot ever do as well as a professional specialist, in the form of a tax accountant. When that tax accountant's knowledge is embedded in the software, suddenly we are talking a new ball game in my opinion. The $$$ saved and the speed of calculation both make the best tax programs highly worthwhile I believe.

Test it out - take an hour or two to enter your data in TaxChopper and you might be surprised that it finds a deduction, credit or transfer that you may not even know about. Last year I discovered the foreign tax credit line 232 deduction through TaxChopper (see my post of March 26, 2009). If it doesn't find anything, at the very least you have a second opinion that you are leaving none of your tax money in CRA's hands. And you don't even have to pay till after you see the end result and you decide want to print or file your return. Sorry if I sound too enthusiastic but I just finished doing a T3 trust return by hand on paper forms for Federal/Quebec and it took two days and 30 pages of paper to report exactly 4 data points from two T5 slips. aRGHH!

James said...

This is really great Thanks for sharing all this useful information.

Student of Canadian college

Anonymous said...

I used to believe that Quick Tax was exceptional, until this year. I do my parents' tax and my father died last year. CRA demands that taxes for such spouses be done independently for year of death. Nevertheless, there are a few CRA allowable options for sharing income and deductions. Quick Tax could not handle this when tax preparation is done independently for the two spoouses. Quick Tax did not have the wherewithall to electronically cross reference the two files, and thus some of this had to be done by trial and error. Further, QT did not let me keep two sessions open at once, thus resulting in much "save" and "re-open" requied to bounce between tax preparations.

In Ontario

CanadianInvestor said...

Anon, re QT limitations, it would be interesting to see how the other top programs compare with their capacity to handle that situation.

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John said...

I used Quicktax last year, and it was great. This year, Quicktax renamed Turbotax is nothing but headaches. I don't know why. said...

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julie - mortgage rates canada said...

I honestly think it depends on the nature of the return. I have also tried only 5dollartax and at that price, it was still overpriced. I wouldn't personally recommend it as it just didn't work.

Ron said...

You might want to try Taxman, it is a free download and is updated every year. It is only for personal use and works fine as long as you have just a standard return.

Anonymous said...

I think letting a firm will cause you get a greater return on your taxes. Tax software is good, but is it the best option.


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