Nonprofit organizations don’t turn a profit by definition, and by extension, they have nothing on which to pay tax. In spite of that fact, some nonprofits still need to submit a return to the Canada Revenue Agency (CRA). If you own or manage a nonprofit, it’s critical to ensure that you stay compliant with the CRA’s regulations.
Who Needs to File a Non-Profit Information Return?
If your organization received more than $10,000 in dividends, interest, rentals, or royalties in the last fiscal period, you need to submit an information return. Additionally, if your organization had more than $200,000 in assets at the end of the last fiscal period, the CRA requires an information return. Finally, if you had to submit an information return last year, you must submit one this year.
What Do You Report on an Informational Return?
The Nonprofit Organization Information Return is just a two page return. The first section requests basic identifying information about your organization. You must list all amounts that you collected throughout the year. In addition to sharing details on dividends, rental income, and royalties, you must note how much you received from sales, gifts (donations), and all other sources. You also have to list all of the organization’s debts and assets and how much it paid out to employees. Finally, you need to describe what the organization does and a bit about its mission.
When Are Information Returns Due?
If you have to submit an information return, the due date is six months after the end of your fiscal period. For instance, if you use the calendar year as your fiscal year, the information return is due on June 1 of the year following that tax year.
The CRA charges a late fee of $25 per day. The minimum late fee is $100, and you can face fines up to $2,500 if you don’t file at all.
Do You Need to Submit Other Documents with Your Information Return?
You don’t need to include any supporting documents with your information return. Basically, the CRA takes your word with regard to what you report. You certify that the information is true when you sign the return.
To be on the safe side, keep all of the supporting documents for your records. Those records are essential if the CRA audits your organization. In most cases, the CRA requires you to keep all documents for at least seven years after you file. If you need to destroy documents for any reason, you can request to do so legally using Form T137 (Request for Destruction of Records).
Are There Other Returns Nonprofits Need to File?
If your nonprofit organization is incorporated, you must file a Corporation Income Tax Return (T2). If you file this nine-page form, you don’t have to worry about filing the information return. The T2 document requests all the same details as the information return and more. If your nonprofit only has a presence in one province, and you’re not claiming any tax credits, you may qualify to do the short version of the T2 return.
To ensure you have the numbers you need when it’s time to fill out tax documents for your nonprofit, it’s critical to keep detailed financial records. Nonprofit accounting software can help.