Late Tax Return Filing for Non-Charitable Not-For-Profit Organizations

Voluntary Disclosure for Late Tax Return Filing for Non-Charitable Not-For-Profit Organizations – A Toronto Tax Lawyer Analysis

Non-Charitable Not-For-Profit Organizations Tax Return Filing Requirements

Non-charitable not-for-profit organizations have two main tax filing requirements. First, like a standard corporation, an incorporated non-charitable not-for-profit organization must file a T2 corporate tax return annually. In addition, if certain income or property thresholds are passed, the not-for-profit organization is then required to file a T1044 Non-Profit Organization Information Return form. The threshold is met if the not-for-profit organization meets any one of three requirements. Each non-profit organization that: (i) has more than $10,000 of property income in a year; (ii) has more than $200,000 in assets; or (iii) has ever met requirements (i) or (ii) in a prior year must file a tax form T1044. Essentially, once a not-for-profit organization meets the requirements to file a T1044 in one year, they must continue to file a T1044 in each subsequent year thereafter. Call our top Toronto tax lawyers and make sure you are meeting your non-charitable not-for-profit tax return filing requirements.

Consequences of Late Tax Filing by Non-Charitable Not-For-Profit Organizations

Like the standard corporation, the penalty for late filing a T2 corporate tax return for a not-for-profit organization is generally based on a percentage of the tax payable. However, not-for-profit organizations are tax-exempt, so they do not owe tax, meaning that there is effectively no penalty for an incorporated not-for-profit organization that late files or does not file a T2 corporate tax return.

On the other hand, the penalty for late filing a T1044 information return when required is a flat penalty of $25 per day late with a maximum penalty of $2,500 per T1044 information return. However, the CRA has an administrative policy not to apply the penalty if it the first time the not-for-profit organization has late filed the T1044 form.

CRA Voluntary Disclosure Program (VDP or Tax Amnesty)

Unlike registered charities, the Canada Revenue Agency (the “CRA”) does not have or maintain a registry for not-for-profit organizations and the CRA has limited resources to monitor tax return filing for not-for-profit organizations. As such, it is not uncommon for a not-for-profit organization to have never filed a tax return or information return. However, there is still a real risk of the CRA discovering that a not-for-profit organization has not been filing as required and that could lead to a hefty tax bill, especially if T1044 forms needed to be filed and this has been going on for a number of years. Fortunately, where the CRA has not yet discovered the unfiled tax return situation, the not-for-profit organization can rectify their filing situation through the CRA Voluntary Disclosure Program (VDP). The CRA Voluntary Disclosure Program is a discretionary program where the CRA can waive all penalties and provide partial interest relief for taxpayers who take the initiate and come forward and disclose their tax return filing or reporting deficiencies. In the context of not-for-profit organizations, as they are tax-exempt, a successful voluntary disclosure application likely means that the penalty for unfiled or late filed T1044 tax forms will be waived and no tax will be owing on the T2 tax return for the not-for-profit organization. If you would like to learn more about the voluntary disclosure program and how you can take advantage of this program, contact one of our experienced and dedicated Toronto tax lawyers.

Disclaimer:

"These articles provide information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

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I did not know that eBay income was taxable, so I did not report it. Then I read about the CRA investigation of eBay and realized that I had a problem. I did some on-line research and found out about the voluntary disclosure program, and I retained the firm of Rotfleisch & Samulovitch as my tax lawyers to represent me. They submitted the tax amnesty application on my behalf, but CRA rejected it for 2 reasons. First, they had sent me a letter about an audit, but I never received it because it went to an old address. Second my bookkeeper made mistakes in the tax returns we submitted to complete the VD. David Rotfleisch, CPA, JD and his team submitted a second level voluntary disclosure review application arguing in detail why CRA was wrong and my voluntary disclosure should be accepted. CRA accepted his arguments and processed the VD with no penalties and reduced interest. If I had originally gone to an accountant I’m sure there would have been a different result. I am delighted with his services and results, and do not hesitate to recommend him.

PN, Saskatoon - Client

CRA assessed me for over $140,000 in tax liabilities due to payments from my husband when he had his own taxes owing. My accountant filed a Notice of Objection on my behalf, but CRA wrote back denying my appeal and giving me 30 days to make further submissions. I went to a trustee in bankruptcy to deal with my tax debt and he referred me to a Toronto tax lawyer, David Rotfleisch. David reviewed my file and said that the accountant did not make the proper legal arguments. He and his team submitted a detailed 13 page submission to the appeals officer. CRA accepted the arguments made on my behalf and eliminated all of my taxes owing. I could not be happier with the result and recommend David to anyone with tax problems.

R.L. Toronto, Ont

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My professional accounting practice consists of individuals and small to large business clients. I'm a Chartered Public Accountant, Certified General Accountant, Certified Public Accountant in the U.S.A. and a member in the Association of Chartered Certified Accountants in the U.K. My clients are often in need of a Canadian tax or business lawyer either to carry out tax planning to reduce taxes owing or to dispute CRA assessments. I have been working with David Rotfleisch for more than 5 years and he is my only choice for legal tax assistance. He is effective, responsive and very committed to solving my client's tax issues. I would not consider going to another tax lawyer for assistance.

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CPA (C.O.), FACCA (U.K.) Toronto, Ont - Accountant

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Howard Landau, CIRP | Partner Dodick Landau Inc. Toronto - Trustee in Bankruptcy

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VOLUNTARY DISCLOSURE FOR LATE TAX RETURN FILING FOR NON-CHARITABLE NOT-FOR-PROFIT ORGANIZATIONS