Paper Tax Return

I am a believer in paper tax returns. This seems to make me a bit of a throwback in this age of very good software packages that assist with completing personal tax returns and online filing. Yet I am no stranger to software, having worked in the field and also having spent my career in technology. With the looming filing deadline I thought I'd explain my reasons for sticking with paper.

For most people, tax returns are pretty straight-forward exercises. The inputs and the claims are known, and usually don't change much from year to year. Sometimes there are complications, including (for those of us in the technology field) stock options, capital gains and losses, more than one employer in a tax year, consulting fees, and so on. Once you've figured out a particular line item, you know it and likely do not need a reminder every year.

While this may seem reasonable, most would argue that there are benefits to tax software. The ones I hear most often are:

• Hints on what to claim and forms to use;
• Inclusion of all possible forms;
• Arithmetic; and
• Automated filing.

To get these benefits you need to purchase a software package every year. Price varies, but let's say that with taxes it's around $25. That is very affordable, especially considering the software typically allows several filings, which accommodates most families. There are costs, however, in using the software. These include: installing the software, learning how to use it, navigating the various screens and hints, and figuring out what questions to ask. Of course, you need to do similar tasks with paper.

Do not expect to get top-notch personal advice on how to structure your and your families claims. That is best done by a professional. Hints are not good enough; you need to know whether to follow-up on a hint, its various side-affects and implications, and you can't be certain that you're getting all the possible advice for your situation. It's helpful but far from perfect. If you need professional advice, get it. It matters not whether you use paper or software

The arithmetic the software performs can save a lot of time spent poking at a calculator, all while worrying whether you've got all the right items included in every calculation. Except, CCRA doesn't care about your calculations. They do it all over again based on the information (inputs) you provide. In this era of linked databases and feeds from your employers and financial institutions, they may find information you've forgotten to include. The only benefits of you doing the calculations are to get a feel for whether you're making suitable claims (and have the opportunity to adjust the filing to get better results) and to avoid penalties if you owe them money and fail to remit the required amount. Unless you have a particularly complex financial life, the first benefit is not substantial - you simply claim everything possible, and you don't need to deal with complex and contrary interactions. To see the second benefit you would have to fall into the minority of filers who aren't claiming a refund. If your primary income is a salary, you almost certainly will qualify for a refund. You get no benefit from correct arithmetic if you are getting a refund. So why bother? Get the numbers close enough for personal comfort and let the government computers do the precise calculations.

Some years I do not have all the forms in the paper package the government mails me. In those cases they are easily available online. I don't find this process to be much of a burden. Some situations, such as long lists of equities purchases and sales, don't have a suitable form: you provide this in a separate list, which I already have in a spreadsheet that I maintain throughout the year. I just print it off.

Instead of automated filing, I lick a couple of stamps and shove the envelope into a mailbox. This is cheap and easy.

Everyone has their reasons for choosing software over paper, even if it's merely out of habit. I have used software in the past but returned to paper when I saw no substantial benefits and got frustrated with dealing with installing new software every year and dealing with all the superfluous questions it would ask me. I can do my paper returns in a couple of hours. That works for me.