Non-profit organizations are more like charities than corporations because of their non-profit status. Although these two groups overlap in many ways, the CRA considers them differently regarding tax and registration. Part 1 of the Income Tax Act exempts non-profit organizations from paying taxes for the portion of their fiscal year in which they meet the standards to qualify as a non-profit organization. Only income tax is free from this exemption. Non-profit organizations must file Form T1044, Non-Profit Organization (NPO) Information Return, instead of a tax return under the Income Tax Act.
Non-profit organizations are exempted from paying taxes, although they may be required to file Form T1044, Non-Profit Organization Information Return, which is the most basic form that charitable organizations must file. However, because NPOs can choose to incorporate or stay unincorporated, this is not the only form required. Incorporated organizations must additionally file a T2 – Corporation Income Tax Return or a T2 Short form.
Larger incorporated NPOs may also be required to file Form T1044 if they received more than $10,000 in dividends, interest, rents, or royalties during the fiscal year, had assets worth more than $200,000 or were needed to file Form 1044 the previous tax year. Finally, trust-held NPOs, such as those that provide dining, recreational, or athletic facilities, must file a T4013, T3 – Trust Guide form.
Form T3010 – Registered Charity Information Return and Form TF725 – Registered Registered charities must complete charity Basic Information Sheet. These documents must be accompanied by a copy of the charity's financial accounts, including any relevant notes. Form T1235, a worksheet for directors, trustees, and similar officials, must also be filled out. Additional spreadsheets and schedules may be required depending on the charity's organizational structure, and the gifts received over the year.
Moreover, if the NPO's assets are greater than $200,000, it should file an information return for the next fiscal term. Once your NPO files an information return, it must do so every fiscal period for the rest of its existence as an NPO. Non-profit organizations are likewise exempt from sales and property taxes. While a non-profit organization's income is not subject to federal taxes, it does pay employee taxes just like any other regular for-profit business.
The beginning and conclusion of the fiscal year are not the same for every not-for-profit organization because each one sets its fiscal year period at its own discretion. As a result, the CRA has created a requirement that all returns are due six months after the fiscal year ends for both charities and non-profits. Returns for a not-for-profit organization that conducts its fiscal year in lockstep with the calendar, from January to December, are due on June 30 each year.
Generally, every entity would file on time, but they could encounter a number of penalties if they don't. The CRA has the authority to cancel a registered charity's status if it fails to file its T3010 annual return by the deadline. The CRA may impose a $500 late-filing penalty at any time after the due date.
The CRA will send a Notice of Intention to Revoke a Charity's Registration if the charity has not filed a return by seven months after the end of their fiscal year–so one month beyond the due date (Form T2051A). In most cases, the legal process to revoke a charity's registration does not commence until the tenth month after the organization's fiscal year-end. If the CRA receives erroneous or incomplete tax receipts or other issues with the charity's books or financial records, the CRA may levy penalties. If an NPO delays submitting its T1044, the CRA may charge a $25 per day penalty, subject to a maximum of $2,500 per year. NPOs can also make use of the CRA's Voluntary Disclosures Program, which allows them to file any pending tax returns.
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