Netfile is a Canada Revenue Agency (CRA) service allowing taxpayers to file their tax returns via 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, as “NETFILE,” it is not an acronym and simply refers to Internet filing.
Not all taxpayers are eligible to use Netfile. Among those banned are people who have become bankrupt in the current or previous calendar year, residents living outside of Canada, and those with income from a business that has a permanent physical presence in a territory or province other than that where the taxpayer resides. There are also a series of more complex situations in which the taxpayer is not allowed to use the service.
In addition, there are restrictions on which returns can be filed through Netfile. A taxpayer cannot use the service in the first year in which she files an income tax return, and amended tax returns are ineligible for the service as well. Also, returns prepared by someone other than the taxpayer are not eligible. Although professional tax preparers who file returns on behalf of their clients cannot use Netfile, they may use a similar service known as EFILE. Tax preparers must have CRA approval before using EFILE.
To file through Netfile, a taxpayer must prepare an electronic tax return using third-party software certified by the CRA. These include standalone applications for Windows and Mac computers, plus a range of web-based applications. As of 2010, around 30 applications had CRA certification, though the list is reviewed and revised each year. While most applications carry a fee, some are available at no cost.
The tax software will prepare a file stored in a dedicated “.tax” format. Only files in this format can be uploaded through Netfile. The user will need to locate this file when filing her return. Although it may vary from application to application, the default location will be in the main “Documents” folder in Windows or the “Home” folder on Macs.
Tavpayers will need a four-digit access code to file a return using Netfile. This is printed on the information sheet of the T1 tax return package received in the mail. Users who have lost this information can retrieve their code through the CRA site by providing their social insurance number, date of birth, and a figure taken from the previous year’s tax return.