Q: I began working as a freelancer last year. I’ve never filed my taxes as a self-employed person before, and when I went to [Big Tax Franchise*] they quoted me a minimum of $500 to file my taxes as a small business. Is this true? Why?

A: The bad news is, your information from [Big Tax Franchise] is correct. You’re looking at paying between $500-1,000 to prepare income tax returns as a self-employed person.

Why is professional tax preparation/accounting so expensive?

The reason self-employed returns cost so much to prepare is that self-employment easily doubles the complexity of a tax return. The preparer needs to review the business expenses to ensure that they’re allowable and being reported correctly, ask the right questions to ensure that nothing is being overlooked, and calculate and provide advice regarding GST/HST.

Self-employment and tax audits

Self-employed people are at a higher risk of being audited/reviewed by CRA, simply by virtue of that complexity — they have more options and choices, and more ways of reporting and justifying their income and tax deductions. There’s simply more to scrutinize in their returns compared to a person with a regular salary.

And CRA can review a return up to seven years after it’s filed. It’s therefore important for the tax preparer to also keep excellent notes and ensure that whatever is filed, can be defended up to seven years later. That also adds to the complexity of the job.

Tax preparation is costly — or is it?

I know that fees estimate is a rough number to hear. Self-employment isn’t necessarily the most lucrative road, particularly when you’re just getting started. So it can be painful to pay so much for tax preparation. However, working with a tax advisor you can trust has a lot of benefits, and not just the obvious one of having someone else do up the return and file for you.

Besides helping with the actual work of tax filing (of course), an experienced tax preparer/advisor can answer your questions, give you confidential tax advice tailored to your values and goals, and use their skills to reduce your taxes as much as possible while helping keep you safe in the event of an audit.

Don’t forget the emotional benefits

One doesn’t always think of accounting services this way, but tax preparation fees are also an investment in your emotional wellbeing. Knowing that you’ve had expert advice, being empowered by good information, and knowing that someone has your back if CRA comes calling, can have a huge impact in terms of peace of mind. People have paid much more for less.

At Personal Tax Advisors, we specialize in stress relief through tax preparation

Get in touch to discuss how we can help you.

*I’m redacting the firm’s name here, but not for privacy reasons. They’re the Big Tax Franchise, and frankly I don’t think they need any more advertising — certainly not from me!