Probably one of the most confusing items facing homeowner and condominium associations is determining what type of entity they are and what type of tax forms they need to file. Many people believe their associations were set up as tax exempt homeowners association, but this is rarely the case. In fact, most homeowner and condominium associations are not tax exempt. Most associations need to choose to file a federal tax return as a normal corporation, or as a homeowners association. An association that files as a regular corporation files form 1120 and typically needs a CPA firm that specializes in homeowners association taxes because the tax rules can be very complex and the risk for filing incorrectly can have severe tax consequences.
Most associations will file as a homeowners association, which requires the association to file form 1120H as opposed to the more complicated form 1120. HOA Tax Help was established by CPA’s that saw a need for a simplified and less expensive alternative than hiring a CPA firm to file their association’s form 1120H. HOA Tax Help developed an online system for preparing form 1120H, which allows a board member or association manager with limited tax experience to prepare the 1120H online.
Did you know?
- All homeowner and condominium associations are required to file a federal tax return.
- Most homeowner and condominium associations are not exempt from taxes.
- Most states require some sort of disclosure of association’s finances.
- Many states require an association to have their financials audited or reviewed on an annual basis.
- Most homeowner and condominium associations have a choice in which federal tax return they file and filing the wrong one can result in thousands of dollars in unnecessary federal taxes.
- Reserve assessments may be subject to federal taxes if they are not properly segregated from operating assessments.