Non-profit organizations (NPOs) in Canada are generally required to file a tax return even though they are exempt from tax on all or parts of its taxable income under the Income Tax Act.
Income Tax Return
NPOs can be either incorporated or unincorporated. Unincorporated NPOs are generally not required to file income tax returns, while incorporated NPOs are required to file a T2 Corporation Income Tax Return.
An NPO that is a trust may be required to file a T3 Trust Income Tax Return. Also, any unincorporated or incorporated NPO with a club, society or association which has the main purpose to provide dining, recreational or sporting facilities for its members is deemed to be a trust and may be required to file a T3 Trust Income Tax Return and pay tax on property income and taxable capital gains in excess of $2,000.
Information Return
NPOs may also be required to file form T1044 - Non-Profit Organization Information Return for a fiscal period only if:
- the NPO received or was entitled to receive taxable dividends, interest, rentals, or royalties totalling more than $10,000 in the fiscal period;
- the book value of total assets of the organization were more than $200,000 at the end of the immediately preceding fiscal period; or
- if the NPO filed an information return for a previous fiscal period.
Once an NPO files a T1044 information return, it must continue to file the T1044 information return form for all subsequent periods as long as it continues to operate as an NPO. Please note that NPOs are not required to include financial statements with their NPO information return.
Filing Deadlines
The T1044 NPO Information Return and T2 Corporation Income Tax Return must be filed no later than six months after the end of the organization’s fiscal period. If an NPO is required to file a T3 Trust Income Tax Return, it must be filed no later than 90 days after the NPO’s fiscal year end.
NPOs that are required to file a T1044 NPO Information Return but fail to do so on time are subject to penalty fees. The basic penalty is $25 per day late. There is also a minimum penalty of $100 and a maximum of $2,500 for each failure to file. To find more information on how to complete the NPO Information Return, visit the Canada Revenue Agency (CRA) website.
Visit McCay Duff LLP’s website to learn more about tax filing for NPOs.
Looking for more tax information for your NPO? Reach out to our team at npo.consulting@uwaterloo.ca.