Young Associates updates, tips, and expertise for nonprofits
No. According to the Canada Revenue Agency, “a registered charity is responsible for all receipts issued under its name and registration number” and “it must be able to account for the corresponding donations on its annual information return and in its books and records”.
It risks losing its charitable status by lending out its number.
Emphatically, yes!
Bonuses are compensation and, as such, are taxable. Here’s a link to the Canada Revenue Agency’s Special Payments Chart. It lays out the requirements for source deductions on an array of payments, including bonuses.
It’s probably a timing issue.
You might be strapped for cash if you are paying off bills from past year losses. In the same way, if you’re doing some early spending on future projects, this year’s money might be flying out the door to get ready for next year.
You could also be tight if you haven’t collected all the money people owe you. For instance, maybe you’ve rented a lot of studio time or gathered a lot of event registrations. If those people have booked but not yet paid you could be in trouble. In the same way, you could have solid fundraising pledges, or a confirmed grant, but still be awaiting the funds.
A tax receipt is actually not obligatory. A charity may choose not to issue receipts because of the administrative burden, or it may elect to set a threshold policy dictating that only donations above a certain cash value will be issued a tax receipt. While it is not the law that charities must issue tax receipts, remember that donors can only claim their charitable tax credit if an official tax receipt is issued. So consider your donors when setting this policy – weigh the administrative burden against the value they place on their tax credit.
Visit this page on the Canada Revenue Agency website for more information.
Staff Post
By Heather Young
From time to time I will share stories from the field – names and details obscured!
One company went through a nerve-wracking time when a former worker – who had been hired on a fee-for-service contract as a freelance consultant – tried to claim EI and insisted to the folks at HRSDC that s/he had been an employee.
The government responded by notifying the company that they were responsible for remitting both the employer and the employee portions of EI and CPP for the duration of the contract. It was up to the company to appeal this decision, and prove that the worker had been properly treated as a freelancer.
To help the organization prepare its appeal, the government provided a lengthy questionnaire, much of it based on concepts you can read about in the CRA publication Employee or Self-employed?, published online.
The company also did some research, including checking the former worker’s social networking activities, where the individual clearly self-identified as a consultant for hire. It’s unclear whether that influenced the happy ending – but I can tell you that in at least one comparable case the defendant’s Facebook page did him in.
After many hours of work and months of waiting, the company finally received the happy news that their appeal was successful.
The CRA ruling made a strong effort to be balanced, stating that “the parties did not share a common intention as to the worker’s employment status” – although the company feels the status was always clear. It outlined all the terms of employment in some detail, noting that the level of “control”, or supervision, of the employee and ownership of tools and equipment were neutral factors – they could have been interpreted to either party’s benefit. The fact that the worker was providing services personally and was not able to subcontract assigned work was deemed consistent with the worker’s contention that s/he was an employee, but the fact that the worker was free to take on other projects for personal profit, and promoted him/herself as a freelance communication consultant suggested to the CRA that s/he was “embarking on a business enterprise on his/her own account.” Weighing all factors, the CRA ruled in the company’s favour: but in reading the written ruling, it looks like it was a close call.
Arts organizations and charities secure all sorts of services on part-time, part-year contracts. It’s worth the effort to research how a particular position should be treated (employee or self-employed?), and to be crystal-clear with the worker both verbally and in a written contract.
Staff Post
By Jerry Smith
Have you ever cursed sales tax calculations, or even worried whether a calculation mattered? Have you ever played sales tax roulette – called the help desk at CRA multiple times with the same question until you got an answer you liked?
First, whatever anyone tells you over the phone is – just an opinion! This was confirmed recently when Young Associates hosted two guests from the Canada Revenue Agency GST/HST Rulings Directorate.
If you want a definitive answer, you need a ruling – an official answer that is binding on the CRA, and that responds to the specifics of your situation.
To get a ruling, submit your query in writing. Follow up to determine when it is assigned to an officer. Follow through with the officer; anything they say on the phone as guidance is solid . . . but wait until you get it in writing. Then it is a ruling.
P.S. While the CRA search engine is thorough and massively detailed, don’t be afraid to try user-friendly Google searches, or speak to any officer at the Rulings Hotline, 1-800-959-8287.
