Leslie Milton, CPA, CA, LPA, Associate Partner
There are reporting requirements under the Income Tax Act when you incorporate a non-profit organization (NPO) under the existing Federal or Provincial legislation.
You will be required to file a corporate tax return declaring that you are exempt from tax under Part I of the Income Tax Act. While penalties for non-filing are based on taxable income, of which your organization has none, directors of NPOs should still ensure they are in compliance with Canada Revenue Agency’s (CRA) reporting requirements.
As with any for-profit corporation, you may select any fiscal year-end within 53 weeks from the date of incorporation. The selection of your fiscal year should be consistent with your organization’s operations and major funders’ reporting requirements.
The Non-Profit Information Return (form T1044), due no later than six months after the end of your fiscal year, is often overlooked by NPOs. CRA can assess penalties of $25 per day for failure to file this form. The minimum penalty is $100, up to a maximum of $2,500, for each failure to file.
Only certain NPOs have to file form T1044. Your organization is required to file this form if:
- You have received, or are entitled to receive, interest, dividends, rentals or royalties totalling more than $10,000 in your fiscal year;
- The total assets of your organization were more than $200,000 at the end of the preceding year; or
- You had to previously file form T1044.
You may be able to avoid the penalties associated with not filing form T1044 on time under CRA’s “taxpayer relief” provisions. You can contact a member of our NPO team to discuss the steps that would need to be taken to bring your tax filings up to date.
If your NPO successfully applies for, and receives, status as a registered charity under the Income Tax Act, you will no longer be subject to these filing requirements. You will, however, have to file corporate tax returns and form T1044 (if applicable) up to the date that your charitable registration status is granted by CRA. From this point on you will be required to file the Registered Charity Information Return (form T3010) annually.
You should speak with your accountant for more information on the filing requirements. Having a complete understanding of what CRA needs from both NPOs and registered charities is very important for the long term success of the organization.
