Although most non-profit organizations (NPOs) are exempt from paying income taxes under Part 1 of the income tax act, there are various tax forms that may still need to be filed with the Canada Revenue Agency (CRA). Many NPOs are not aware of these obligations, and inadvertently fail to comply with CRA’s filing requirements. This can become an issue if CRA owes you a GST refund but is withholding it until you file the correct forms and returns.
An organization will only have to file an NPO information return if:
- It received or was entitled to receive taxable dividends, interest, rentals or royalties totaling in excess of $10,000 in the fiscal period;
- The total assets of the organization were more than $200,000 at the end of the immediately preceding fiscal period. The book value of these assets are calculated using accounting standards for not for profit organizations; or
- It had to file an NPO information return for a previous fiscal period.
For example, on the 2015 financial statements, the NPO’s total assets had a book value of $205,000. This NPO would be required to file a Form T1044, Non-Profit Organization Information Return no later than six months after their 2016 year-end. This is required even if total assets had dropped to $180,000 on their 2016 financial statements.
It should also be noted that once an NPO is required to file a NPO Information Return, they will be required to file it for all future fiscal periods.
In addition to the NPO Information Return, an NPO may also be required to file a T2 – Corporate Income Tax Return, a T2 Short or a T3 – Trust Income Tax and Information Return.
It is important to stay on top of all your income tax filing requirements, even if the NPO is exempt from paying taxes. We would hate to see the CRA withholding a GST return or other monies owed to you due to non-compliance. Determining an NPOs filing requirements can be complex but we are here to help. Please contact Cloutier Matthews LLP for more information.