When we’re talking about taxes and CRA, there’s a lot of jargon thrown around, and it can be quite confusing. Whether it’s capital cost allowance, eligible dependant, deductions, credits, or NAICS codes, there’s seemingly no end to the terminology you have to make sense in order to prepare what should be a simple tax return.
And then there is EFILE and NETFILE. Just what is the difference between them, and how do they apply to you?
To begin with, both involve the electronic transmission of a tax return to CRA, and have a series of exclusions; conditions that if they apply, make the return ineligible to be transmitted electronically and so must be sent by traditional mail to CRA.
This is the electronic service that most individuals are familiar with from filing their yearly tax returns. It allows you to file your personal income tax and benefit return directly to the Canada Revenue Agency (CRA) using the Internet.
However, you are not able to change your name, address, or Direct Deposit information using the NETFILE service. You must first contact CRA with the change of information before you attempt to NETFILE the return. Additionally, you are only allowed to file your own taxes for the current year using NETFILE, although it is possible this may change in the future.
Lastly, there is a limit of twenty returns total per computer that can be filed using NETFILE, so if the whole family is preparing their taxes using NETFILE and there are more than twenty family members filing, they would need to use more than one computer to get them all filed.
EFILE is an automated service that permits those who prepare and file taxes on behalf of others to electronically file the current year income tax and benefit return to the CRA via the Internet.
Because EFILE representatives are registered with CRA as tax professionals, there are somewhat fewer restrictions on what can be done using the service, for example changing a client’s name, address or Direct Deposit information while filing their return. They also have no limit on the number of tax returns that can be filed from a single machine.
Becoming an EFILE representative is free! For more information, consult the CRA’s webpage here.
OK, so how does this affect me?
First, and most importantly, this means that there are two different software packages for preparing a return with TaxTron tax preparation software and they are not interchangeable. The professional versions of our software are only suitable for those registered with CRA as EFILE representatives and do not support sending a return via NETFILE.
Conversely, tax professionals are required to use EFILE-capable software in order to electronically file returns. In fact, failure to EFILE returns that qualify for electronic filing can result in fines and other penalties from CRA, so it’s important to file electronically if it’s possible to do so.
And the plus side is that it’s markedly faster to have your electronically transmitted return processed versus sending it in the mail. In addition, the software goes through literally thousands of test to make sure it matches with the expected results from CRA, so the chance of errors in the return is greatly reduced.
So when downloading or purchasing your software make sure you have selected the right product for your needs. TaxTron has inexpensive solutions available for both T1 and T2 returns, on both Windows and Mac-based systems, so don’t wait until the last minute. Get peace of mind and get your return processed faster, file electronically. Visit our Product page today to get started.