Leslie Milton, CPA, CA, TEP, Associate Partner
Even though non-profit organizations may not have taxable income to report, there are legal obligations about tax filing that you still need to follow. For example, when you incorporate a non-profit organization (NPO) under federal or provincial legislation, there are specific reporting requirements that apply to your organization.
Your obligations under the Income Tax Act
To comply with the Income Tax Act, your organization must 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 comply with the Canada Revenue Agency’s (CRA) reporting requirements. Failure to do so could result in the revocation of registered charity status.
No later than six months after the end of your fiscal year, certain organizations must also file the Non-Profit Information Return (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.
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.
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.
Special obligations for registered charities
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 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.
For more information on NPO filing requirements, speak with your accountant. Having a complete understanding of what CRA requires from NPOs and registered charities is very important for the long-term success of any organization.
