Netfile is a Canadian Revenue Agency service for individuals to file tax returns online. Not all taxpayers can use it, and certain returns and situations are ineligible. Taxpayers need a certified software and a four-digit access code to submit returns.
Netfile is a service of the Canadian Revenue Agency (CRA) that allows taxpayers to file their tax returns over the Internet. It is aimed at individuals, rather than professional accountants or tax preparers. Although the CRA usually lists the service in all capital letters, such as “NETFILE,” it is not an acronym and simply refers to Internet storage.
Not all taxpayers can use Netfile. Those banned include individuals who have filed for bankruptcy in the current or previous calendar year, residents who live outside of Canada, and those with income from a business that has a permanent physical presence in a different territory or province from where the tax payer resides. There are also a number of more complex situations in which the tax payer cannot use the service.
Also, there are restrictions on which returns can be submitted via Netfile. A taxpayer cannot use the service in the first year they file a tax return, and revised tax returns are also ineligible for the service. Also, returns prepared by someone other than the taxpayer are not eligible. While professional tax preparers filing returns on behalf of their clients cannot use Netfile, they can use a similar service known as EFILE. Tax preparers must have CRA approval before using EFILE.
To file via Netfile, a taxpayer must prepare an electronic tax return using CRA-certified third-party software. These include standalone applications for Windows and Mac computers, as well as a range of web-based applications. In 2010, around 30 applicants had CRA certification, although the list is reviewed and updated every year. Although most of the applications are paid, some are available for free.
The tax software will prepare a file stored in a dedicated “.tax” format. Only files in this format can be uploaded via Netfile. The user will have to locate this file when submitting his return. Although it may vary from application to application, the default location will be in the main “My Documents” folder in Windows or in the “Home” folder in Mac.
Tavpayers will need a four digit access code to submit a return using Netfile. This is printed on the information sheet of the T1 tax return package received in the post. Users who have lost this information can recover their code via the CRA website by providing their Social Security number, date of birth and a piece of data from the previous year’s tax return.
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