T1044 and T3010: Non-Profit Books and Returns in Canada

Is my organization a non-profit or a registered charity?

The CRA treats them as two different bodies, and which one you are decides the return you file and the records rules you follow. A registered charity is registered with the CRA, issues official donation receipts and files a T3010 every year. A registered Canadian amateur athletic association (RCAAA), a sports body registered with the CRA, files Form T2052 within six months after its fiscal period ends, not a T3010 or a T1044 (subsection 149.1(14); T4117). A non-profit organization (NPO) is a club, society or association that is not a charity, is organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or another purpose except profit, and none of its income is payable to, or otherwise available for the personal benefit of, a proprietor, member or shareholder (Income Tax Act, paragraph 149(1)(l); CRA guide T4117). An NPO cannot issue tax receipts for donations or membership fees (T4117). A sports club that never registered is an NPO only if it meets that test.

Three things make a case not simple. First, the Act's definition of a charity does not turn on registration (subsection 149.1(1)), and paragraph 149(1)(l) covers only a body that, in the Minister's opinion, is not a charity. Whether an unregistered organization with charitable purposes is a charity or an NPO depends on its purposes and how it uses its resources, and the CRA decides. Second, an organization that runs for profit or pays its income out to members may not meet the NPO test at all. Third, a T1044, T2 or T3010 missed in an earlier year, a CRA letter, or books handed over with no statements call for checking the filing history and rebuilding the affected years, while current filing deadlines stay in view; see "Different for you?" at the end.

Gather before filing anything: the bylaws or articles, the CRA registration letter if there is one, the last financial statements, bank statements, grant agreements, and lists of members, paid officers and employees.

Who has to file a T1044, and when is it due?

An NPO files a T1044 when any one of three tests is met, and it is due six months after the fiscal period ends. The Income Tax Act requires the return if (subsection 149(12); T4117):

• Taxable dividends and amounts received or receivable as interest, rentals or royalties total more than $10,000 in the fiscal period.
• Total assets, worked out under generally accepted accounting principles (the standard accounting rules), were more than $200,000 at the end of the preceding fiscal period. A ledger that records only cash in and out can understate them; see cash or accrual accounting.
• A T1044 was required for an earlier fiscal period. Once the return applies, it is due for every later period.

For a December 31 year-end, the due date is June 30.

A case stops being simple when a test was crossed in an earlier year and no return was filed: the return is then late for every year since. Gather the investment and bank statements for the interest, rentals and royalties, and last year-end's balance sheet for total assets.

Does an incorporated non-profit also file a T2?

An incorporated non-profit generally files a T2 as well. A corporation, including an NPO or other tax-exempt corporation, files a T2 for every tax year, even when no tax is payable (T2 guide; T4117). The T2 is due six months after the tax year ends. The T1044 does not replace it: both can be due for the same year.

If the organization's main purpose is to provide dining, recreational or sporting facilities for its members, its property is deemed held by a trust (the corporation is the trustee) and a T3 return must also be filed; that trust is taxed on its property income and taxable capital gains (T4117; subsection 149(5)). The T3 does not replace the club's T2 or a T1044 it owes. A trust's return is due within 90 days after the end of its year (paragraph 150(1)(c)), earlier than the six months above. Interest and rentals can be taxable to such a club even when its other income is not.

An unincorporated club or association has no T2 but may still owe a T1044. A tax-exempt corporation under section 149 may be able to use the T2 Short Return, subject to the guide's other conditions.

The one exception is a corporation that was a registered charity throughout the year (subsection 150(1.1)). A corporation registered for only part of the year does not get it. Late T2 years are covered in catching up on unfiled corporate returns.

Does a registered charity file a T3010, and when is it due?

Every registered charity files a T3010 each year, no later than six months after the fiscal period ends (CRA overview; when to file). For a December 31 fiscal period end, the due date is June 30. The return can be submitted online or by mail today; the CRA says it aims to have all T3010 returns filed online beginning in 2027.

An incorporated charity does not file a T2 for a year it was registered throughout, so the T3010 is its annual return.

What happens if the T1044, T2 or T3010 is late?

The T1044 penalty is for the failure to file, so it can apply even when no tax is owed, and it applies to each failure, so each late fiscal period can carry its own (T4117; subsection 162(7)). The T3010 penalty is set by subsection 188.1(6); subsection 162(7) leaves registered charities out. The CRA says it can waive the T1044 penalty when the return is late because of extraordinary circumstances beyond the organization's control; relief is covered in penalties, interest and relief.

A charity whose registration is revoked can no longer issue official donation receipts and is no longer exempt from income tax. The CRA says it must give all remaining assets to an eligible donee or pay a revocation tax equal to the full value of its assets; how the tax is calculated is in the Act, so a charity facing revocation should have the figure worked out before acting (CRA). The CRA says it may revoke for failure to file; revocation is not automatic.

What books and records must a non-profit organization keep?

A non-profit organization keeps detailed books and records that let the CRA verify the amounts on its return, for six years from the end of the last tax year they relate to, on paper or electronically (T4117).

The guide names no specific records. To support the T1044 lines below, a treasurer would normally keep:

• A ledger of every receipt and payment, tied to the bank statements.
• Membership records and the dues received from each member.
• Invoices and receipts for expenses, and the agreement behind each grant.
• Payroll records for paid staff, and a record of anything paid to a member or officer.
• Minutes that approve large payments and the annual statements.

Six years is the default, not the only rule. An incorporated organization keeps its general ledger, directors' and members' minutes, and the special agreements behind the ledger until two years after it is dissolved (Regulations, paragraph 5800(1)(a)). Records for a year whose return was filed late are kept six years from the filing date, and records tied to an objection or appeal until it ends (subsections 230(5) and (6)). The full rules, including what changes when an organization closes, are in how long to keep business records.

What records must a registered charity keep, and where?

A registered charity must keep adequate books and records at the Canadian address it has on file with the CRA (CRA books and records). Retention depends on the record:

A revoked charity keeps the ledger group and the minutes group for two years after the date of revocation. An incorporated charity also keeps its general ledger and directors' minutes until two years after the corporation is dissolved, which can be longer than the table (Regulations, paragraph 5800(1)(a)); a T3010 filed late also moves the six-year count to the filing date.

Electronic records must stay in a readable electronic format. The CRA states that records maintained outside Canada but accessible electronically in Canada do not meet the Canadian-address rule, so records held only on a server abroad are a risk. Records first made in a language other than English or French must also be available in translation. Inadequate records can lead to penalties, suspension of the right to issue receipts, and loss of registered status.

The books must let the CRA verify all revenue, including donations received, that resources are spent on charitable programs, and that the purposes and activities are charitable. In practice, keep donations in their own accounts apart from other revenue, and group expenses by program.

What does the T1044 ask, so what should the books track?

The T1044 reports money received, assets and debts, and what was paid to employees, officers and members. Accounts that match its lines let the books produce the return (T4117).

The return also asks for a description of the activities, and only a current officer can sign the certification.

What financial statements do members get, and when is a review or audit needed?

The statements members receive, and whether an accountant must review or audit them, depend on the statute the corporation is incorporated under, not on the CRA return. This page covers the federal Act and Ontario; other provinces and Quebec differ and are not covered here. The statute is on the certificate and articles of incorporation: a federal certificate from Corporations Canada, or one from a provincial or territorial registry.

Federal Act. The directors place the financial statements before the members at every annual meeting. They go to the members not less than 21 days and not more than 60 days before the meeting, unless the bylaws allow notice that they are available at the registered office (Corporations Canada). A corporation is soliciting when it received more than $10,000 in a financial year from public sources, such as gifts or donations from non-members and government grants, and the status lasts from the first annual meeting after that year until the third annual meeting after that first one (Corporations Canada; Regulations, section 16). A soliciting corporation also sends Corporations Canada a copy of the same documents at least 21 days before the annual meeting (or without delay after a written resolution replaces the meeting), and in any event within six months after its financial year ends (Act, section 176; Regulations, section 78).

Sources: Act, sections 179 to 190 and Regulations, sections 80 and 84. Revenue is for the last completed financial year. These resolutions last until the next annual meeting; an ordinary resolution requiring an audit may instead set its own period. Where no accountant is appointed, Corporations Canada says only a compilation is necessary.

Ontario. An Ontario corporation's level depends on its revenue and on whether it is a public benefit corporation: a charitable corporation, or a non-charitable one that receives more than $10,000 a financial year in donations or gifts from people who are not members, directors, officers or employees, or in grants from a government or its agencies (Ontario).

An audit is the default. Ontario says an audit, or an audit and review engagement, can be waived only by an extraordinary resolution: at least 80% of the votes cast at a special members' meeting, or the written consent of all voting members. Ontario's guide reads the rows this way: a public benefit corporation in the "waive" row can waive both the audit and the review; one in the "review engagement" row can waive the audit but still needs a review; a corporation that is not public benefit and is over its ceiling can waive the audit but still needs a review. The waiver applies until the next annual meeting of the members (Ontario guide to the Act). Check the bylaws, which may set stricter rules. What a review engagement and a compilation involve is in compilation or review engagement.

Does a non-profit register for GST/HST, and what is the public service bodies' rebate?

A non-profit or charity registers for GST/HST based on its revenue from taxable sales, and separately the public service bodies' rebate returns part of the tax it pays on purchases, registered or not. Registration rules are in when to register for GST/HST; recording the tax is in recording GST/HST in your books.

• Registration: non-profits and charities have their own small-supplier tests, not the ordinary business threshold, published in RC4081 and RC4082.
• Rebate: a charity or qualifying NPO may claim 50% of the GST and the federal part of the HST paid on eligible purchases and expenses for which it cannot claim input tax credits; any other GST/HST rebate it claims is deducted. Participating provinces add a rebate of part of the provincial HST. An NPO qualifies when its percentage of government funding is at least 40%; the percentage is worked out by a regulation, and after its first year an NPO that falls short in the current year can qualify on the one or two preceding years, so do not rule it out from this year's accounts alone (RC4034).
• How and when to claim: on Form GST66. The limit is four years from the due date of the return for the claim period (a registrant) or from the last day of the claim period (a non-registrant).

We have a new treasurer: what do we collect from the old one?

A new treasurer collects everything the next return is built from, before the old treasurer's access ends:

• The bylaws or articles, the CRA registration letter if any, and the board minutes that appoint the new treasurer.
• The filing history: which T1044, T2 and T3010 returns were filed, and when.
• The last approved financial statements and the year-end working papers behind them.
• The accounting file with a login that is not the old treasurer's personal account, every bank statement to date, and a bank and cash reconciliation to the handover date signed by both treasurers, so the new books open on agreed balances. Include term deposits, GICs and any cash on hand.
• Online banking access and signing authority in the organization's name.
• Grant agreements and reports, with what is spent and what is not.
• The member list, dues records, and a list of who was paid and who is a member.
• Donation receipt copies and the receipt log, for a charity.
• Any CRA letters, and who is authorized to deal with the CRA for the organization.

If statements for a year are missing, start from the bank statements; the method is in catching up on overdue books. For a fresh set of accounts built around the returns, see setting up books.

Example

These examples are illustrative. All amounts are Canadian dollars.

An incorporated soccer association with interest income

A community soccer association is incorporated and not registered with the CRA as a charity or an amateur athletic association, with C$80,000 of revenue and C$25,000 of GIC interest in its fiscal year. The interest is over the C$10,000 test, so it files a T1044 six months after year-end, and, as an incorporated NPO, generally a T2. With a December 31 year-end, both are due June 30. Next year, even if interest falls to C$2,000, the T1044 is still required, because one was required before. If its main purpose is to run sporting facilities for members, a T3 is also required, within 90 days after its year-end, and the interest may be taxable; the T2 and T1044 are still due.

A registered charity food bank

A neighbourhood food bank is a registered charity that received C$150,000 in donations. It files a T3010 within six months of year-end and, if it is incorporated, still files no T2 for a year it was registered throughout. It keeps ledgers, financial statements and T3010 copies for six years, copies of donation receipts for two years, and its minutes and bylaws while registered. If the T3010 is not filed, the CRA may revoke the registration and the receipts stop.

An unincorporated seniors' club with a large bank balance

A seniors' club is not incorporated, with C$30,000 of revenue and C$220,000 in the bank at last year-end. Total assets of C$220,000 or more at the end of the preceding fiscal period are over the C$200,000 test, so, if the club is an NPO under paragraph 149(1)(l), it files a T1044 six months after year-end this year and in later years, even if its assets fall. There is no T2, because the club is not a corporation. The treasurer reports dues, grants, interest, and any pay to officers who are members.

A club that crossed the asset test and filed nothing

A club that is an NPO under paragraph 149(1)(l) has C$250,000 in assets at the end of year 1 and files no T1044 for years 2, 3 and 4. Each late fiscal period can carry its own penalty, so up to three penalties apply, each at most C$2,500, up to C$7,500 in all. Filing the three returns is the first step, and the books for each of those years come first.

Different for you?

If a CRA letter has arrived, a T1044, T2 or T3010 was missed, or the board inherited books with no statements, three things need settling together: which returns the organization owes, whether earlier years are late, and how the books are set up so the next returns come straight from them. Start with bookkeeping help.

• A CRA letter or penalty notice: see penalties, interest and relief; the books for the years in question come first, with bookkeeping help.
• Several years of T1044, T2 or T3010 returns missed: each late fiscal period can carry its own penalty. The T2 side is in catching up on unfiled corporate returns; the books for each missing year come first.
• The board inherited books with no statements: see catching up on overdue books.
• Revenue is near a review or audit threshold, or a funder wants reviewed statements: see compilation or review engagement.
• A club that owns or runs a hall, rink, courts or a clubhouse: the T3 and property-income tax may apply; confirm before the next filing.
• Grants fund the programs: see government grants in the books.
• The organization pays staff or collects GST/HST: if an incorporated organization fails to remit payroll deductions or net GST/HST, its directors at the time can be liable with it, and a claim can be made up to two years after a director leaves the board (Income Tax Act, section 227.1; Excise Tax Act, section 323). See running payroll.
• GST/HST registration or the rebate: the registration tests are in RC4081 and RC4082 above, the rebate in RC4034; the general process is in when to register for GST/HST.
• Incorporated in Quebec or a province other than Ontario: this page does not state those statements, review and audit rules, so confirm them before the next annual meeting.