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Reporting Requirements of Charities & Non-Profit Organizations in Canada

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The current reporting requirements for Charities & Non-Profit Organizations have left a lot of our clients wondering what exactly they are required to file. This article is intended to act as a general guideline for the reporting requirements of Charities & Non-Profit Organizations.

Charities

Under the Income Tax Act, every registered charity has to file an Information Return each year. The return must be filed no later than six months after the end of the registered charity’s fiscal period.

The Information Return includes:

  • Registered Charity Information Return, Form T3010A
  • Registered Charity Basic Information Sheet, Form TF725
  • List of directors/trustees or like officials, Form T1235
  • List of qualified donees, Form T2136
  • Copy of the registered charity’s financial statements

CRA will send a Registered Charity Information Return Summary to acknowledge that they have received and processed your return. A charity that does not file its return can lose its registered status and may be liable for a $500 penalty.

A registered charity must spend a specific amount each year on charitable programs or as gifts to qualified donees, the gifts can be anything from plant wear jewelry to any food supplements. This amount varies according to the registered charity’s designation and is called its “disbursement quota”. The purpose of the disbursement quota is:

  • To ensure that most of the registered charity’s funds are used to further its charitable purposes and activities;
  • To encourage registered charities not to accumulate excessive funds; and
  • To keep other expenses at a reasonable level.

Essentially the disbursement quota is in place to ensure that registered charities actively use their tax-assisted donations to help others according to their charitable purposes. To help registered charities plan their expenditures, the quota is largely based on what happened in the previous years. Consequently, at the end of one year, a registered charity should have a fair estimate of how much it will need to spend on its charitable programs the following year.

A disbursement excess is created when a charity spends more on charitable activities or by way of gifts to qualified donees than it is required to by its disbursement quota for that year. A charity can apply a disbursement excess from one year against a disbursement shortfall occurring in the immediately preceding fiscal period. If necessary, a charity can also draw on a disbursement excess for up to five of its following fiscal periods to help it meet its disbursement quota.

If a charity spends less on charitable activities or by way of gifts to qualified donees than its disbursement quota for that year, it has a disbursement shortfall. A charity can draw on previous years’ disbursement excesses to cover a shortfall. If no excesses are available to draw on, the charity can try to spend enough the following year to create an excess that will make up for the shortfall. Continuous shortfalls can lead to revocation of the charity’s registration.

Non-Profit Organizations (NPOs)

A non-profit organization must file a Non-Profit Organization Information Return (Form T1044) if:

  • It received or was entitled to receive taxable dividends, interest, rentals, or royalties totaling more than $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 amount of the organization’s total assets is the book value of these assets calculated using generally accepted accounting principles); or
  • An NPO information return had to be filed for a previous fiscal period

Once an organization has filed an NPO information return for a fiscal period, it must file an information return for all subsequent fiscal periods, as long as it remains an NPO and regardless of the dollar value of its revenues or the book value of its assets in those later years.

An organization has to file its NPO information return no later than six months after the end of its fiscal period. If the organization fails to do so on time, the basic penalty is $25 a day. There is a minimum penalty of $100 and a maximum of $2,500 for each failure to file. An NPO is not required to include financial statements with the NPO information return.

Unlike charities, there is currently no disbursement quota that regulates where an NPO must spend its revenues.

Ultimately it is the responsibility of the Board of Directors to ensure that their organization complies with the aforementioned reporting requirements. If you have any questions relating to the reporting requirements of your organization.

Maximize Your Tax Return

As a charity or NPO owner in Canada, it is important to understand the reporting requirements that apply to you, the tax return process, and any tax deductions you may be applying for.

If you are looking for a professional Tax Accountant who can lead you through the process of claiming business expenses on your tax return, then feel free to reach out to Filing Taxes. Our professionals take into account the laws in your jurisdiction, so you get the maximum benefits no matter where in the country you live. If you would like a tax accountant to file your return, book a call with our tax expert to file your taxes from start to finish. Experts at Filing Taxes will be happy to assist you in this pursuit. To speak with an experienced accountant, contact Filing Taxes at 416-479-8532 or [email protected] Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.

Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.

Salman Rundhawa
Salman Rundhawa
Salman Rundhawa is the founder of Filing Taxes. Salman provides valuable tax planning, accounting, and income tax preparation services in Toronto, Mississauga, Oakville, and Hamilton.

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