Does free tax software come with a catch? No, say developers

Filing your taxes can be a chore. You have to keep up with Canada's tax rules changing year to year. There are piles of forms to fill and questions to answer a complicated process that involves combing through T-slips, receipts and other paperwork.

Those who choose not to hire a professional to deal with their returns can take on the task themselves with the help of any number of tax-preparationsoftware programs.

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Over the years, as the number of Canadians filing digitally has grown, so has the number of companies offering such software, with manysmaller players enteringa field once dominated bybig names such asH&R Block, UFile and Intuit.

As the choice of providers has grown so has the number of available free programs, but just why would someone go to the trouble of developingtax softwareand not charge money for it?

Why pay for tax returns?

Interviews with several developers offree tax programs suggest many weresimply offended bythe notion of having to pay to fileyourtaxesand decided to create free alternatives to existing paid programs which cost anywhere from $7 to $70.

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"We as Canadians already pay tax for our incomes and many other services,"saidFaxinZhao, the main developer behindeasyCTAX. "Why do we have to pay again for the tax returns?

"So, I thought, if we can develop a totally free software for filing the tax returns, that will be a benefit for most people, and it can save a little for them."

EasyCTAX was developed by Zhaoand a team of about 10 of his co-workers at Mississauga, Ont.-basedNew Rainbow Inc.,where Zhao is a director. Thecompany's for-profit business helps fund the free program.

Free tax programs, which are also offered by the big firms for certain income brackets, are just as secure as paid ones as long as they have beencertified by the Canada Revenue Agency. Allare bound by the Personal Information Protection and Electronic Documents Act when it comes to protecting your personal information, and all use an encrypted system of transmitting data to the CRA.

In order for areturn to beaccepted by the tax agency's digital filing system, Netfile, it has to have been filled out using one of the CRA-approved programs.Once it's filed, "the CRA accepts responsibility for the security of information," said CRA spokeswoman Jennifer McCabealthough the tax agency isnot immune to security breaches.

As with paid programs, users of free softwarehave the choice of deletingpersonal information such as their address and SINfrom their account or storing it in the program from year to year. Some programsstore the data in an encrypted account that can only beaccessed by users; others provide downloadable software that storestheinformation on a user's own hard drive.

All developers CBC interviewed said they don't collect user data for tracking or analyticpurposes.

Just another form of freeware

The idea of providing a free service when others are charging for itis not foreign to the tech sector. Everything from web browsers to video players and word processing programs can be found for free online.

This is not a new idea free software.- BadreddineKaroui, StudioTax developer

"This is not a new idea free software," said Badreddine Karoui, the main developer behind StudioTax, which became available online in 2004 andbills itself as the pioneer free tax software in Canada.

"You can virtually have your computer, all your tools, for free.It's not a noble idea. What's missing was there's no free software for income tax. This is why we brought it in," he said. StudioTax is produced by BHOK IT Consulting, a group ofsoftware development professionals based in Ottawa.

People who use StudioTaxcan opt to give a donation once they finishtheir return. Karoui said, on average,users donate about $15.

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Karoui said he doesn't know exactly how much it costs him to runStudioTax.

"It's not something I keep track of," he said. "You're talking to not your traditional business here. And it doesn't matter because this certain thing, you don't put a cost on. People volunteer for nothing."

Karoui, who said he used to make a decent salary as a software architect at a U.S. firm, said money is not what drives him.

"It's purpose in life," he said. "You get up in the morning, and you want to do something interesting. That's more motivating than making more money."

Design-focused tax software

A similar philosophy motivates Jonathan Suter, one of the founders of SimpleTax, a small Vancouver company thatbecame CRA certified two years ago and also doesn't charge users but accepts donations.

"The primary goal for us is not to maximize profit," Sutersaid. "It's, 'How do we help as many people as possible while still running a sustainable business?'"

Suter said he believes that if youbuilda great product that attractsusers, the money will follow.

Heand his two colleagues got into tax software because theysaw a gapin the market namely, design-focused programs.SimpleTax distinguishes itself by using aclean, uncluttered interface that Suter describes as"beautiful."

You need to be a little bit crazy to build tax software.- JonathanSuter, SimpleTax

"Given how complex our tax system is, what we're trying to dogiven that we can't change the tax law itselfis try to make it accessible to as many people as possible, because we really do believe that most Canadians should be able to do [their] own taxes.

He admits thatthe venture is "an experiment" and that it remains to be seen whether it is sustainable in the long term.

"We're also a little bit crazy. But then again, we are building tax software, so I think you need to be a little bit crazy to build tax software."