The Canada Revenue Agency (CRA) has been targeting registered charities over the past couple of years and will continue to do so in the future.
For many registered charities, the donations they receive are vital to continuing to deliver services and support to the communities they serve. In some cases, the key to receiving donations is to provide tax receipts to the donor. To do this, the charity needs to register as a charity and maintain their registered status.
There are key requirements for an organization to maintain their charitable status. Filing of an annual Registered Charity Information Return (T3010) is one.
The consequences of failing to file the Registered Charity Information Return can be severe. The charity can have its charitable status revoked within months of failing to file and then be unable to issue charitable receipts as a result. In addition, or alternatively, the charity would be issued a $500 Failure to File penalty. Once charitable status is revoked, it may not be posssible to re-register. If you're allowed to re-register, there may be a Revocation Tax imposed.
As well as losing charitable status from failing to file the T3010, many organizations fail to understand that an incorrect filing of the T3010 can cause CRA to review and suspend charitable status, and in extreme cases, revoke the status. In the 2012 Federal Budget, CRA was given the authority to suspend a charity for an incomplete T3010. Some of the more common things that could be considered incomplete are as follows:
Correct Forms – CRA requires the organization to file the Registered Charity Information Return on the correct and prescribed form. These forms change from time to time and it is important to file the return on the correct T3010. At the time of writing this blog, the current form is T3010-1, however it is anticipated that this form will be updated at some point in 2013. Using an incorrect form can be considered an incomplete filing.
Schedules – Ensure that all the necessary schedules are completed and filed with the return, or it can result in an incomplete filing and subsequently a suspension.
Financial Statements – The organization's financial statements must be included for the filing to be considered complete. This is the case even for an organization who is just starting and has nothing on the financial statements. In this case, the organization would send a financial statement with zero's to avoid the suspension and the hassle of having to answer to CRA.
Directors – Complete information on the directors must be listed in the appropriate place on the Return. In particular, a common area that is incomplete in this section is the date of birth of each director.
Complete and Accurate Information – Not providing all the information on the T3010 or providing inaccurate information can also cause a suspension of the registration.
The government is becoming much more rigid with these filings and each organization should take the time to ensure they are completing their T3010 – Registered Charity Information Return under the proper guidelines considering all the issues noted above.
There are resources available on the internet on various charity websites and the CRA website to assist organizations with the preparation of these returns. It is always recommended to use the CRA website as the most current source of information.