Tax Return or Form 990-N for HOA?

[NoiseBoy]

My HOA has an all volunteer board. When we couldn't find someone to replace our out-going treasurer (the only board position with work!) we decided to hire a local accounting office to be our bookkeeper. This year they contacted me, I'm the secretary for the board, to ask if the HOA wants to file a Federal tax return. I checked with our old treasurer and learned that we have never filed a return, at least not within the past 10 years.

We have 36 units in our HOA and our dues are $400 a year. That is all of the income that we collect and we spend it on lawn maintenance, snow removal, insurance, and professional fees. We do not have any interest bearing savings.

In the research that I've done, annual dues are not considered income for HOAs. Also, I found this e-file option for chairtable orgs that have less than $50,000 in gross income. Our accountant will charge us $200 to file a tax return, so I have two questions for the experts here:

1. Given our income, do we even need to file?
2. If we have to file, can we use Form 990-N for small, exempt orgs?

 

[pb4uski]

If your HOA qualifies to file a Form 990, then a Form 990-N would be appropriate since your gross income is less than $50k.

Did your accountant indicate what form they would file for $200? I file a Form 990-N annually for our lake association and it takes 2 minutes.

I know our condo association files an 1120-H and I think that might be the form you want to file.

 

[NoiseBoy]

Did your accountant indicate what form they would file for $200? I file a Form 990-N annually for our lake association and it takes 2 minutes.

I know our condo association files an 1120-H and I think that might be the form you want to file.

I assumed that they meant a regular tax return, but I didn't know about the Form 990-N option before. I will ask them about it and also if they think our HOA qualifies.

 

[NoiseBoy]

I know our condo association files an 1120-H and I think that might be the form you want to file.

This is the form that our accountant says we need to file. I read the instructions for the form and I didn't see any exceptions. Under the instructions for Form 1120, the IRS writes that all corporations have to file whether or not they have any taxable income. Oh well, another $200 onto the professional fees line item I guess.

 

[pb4uski]

Yeah, a whole $5.56 per door annually.

 

[m3bs]

Having recently become treasurer for our HOA, this thread caught my attention. To my knowledge no tax forms have been filed for about 20 years, so I’ve been trying to see what needs to be done. I tried to go the 990-N route, but the system wouldn’t recognize our tax ID number. Some research revealed that the tax ID number is canceled if a return isn’t filed for 3 years, so I had to apply for a new number. I got the new number, along with a email saying I needed to file 1120 by today. I’ll try the 990N again next week with the new number. Hopefully the IRS will recognize it by then. We are registered with the Secretary of State as a non-profit, and our total proceeds are less than $20K, so hopefully I can skip the 1120.

 

[Gotadimple]

You want to file a form 1120-H for homeowner associations, and it is super simple to do taking about 5 minutes. You are correct dues are not income, they are considered exempt function income and excluded from being taxed.

Interest on bank accounts is income.
Paying an accounting firm to do the filing may not be allowable as an expense. See page 2 of the instructions - any expense has to be directly related to acquiring or maintaining the property. You may want to follow up with the accounting firm to find out how they would show their fee as a deductible expense.
You won't owe any tax as you have no interest income, and you won't owe a penalty for not filing because you don't owe any tax.

So if you have no earned income your filing simply shows you have no earned income and keeps your IRS designation as a not-for-profit homeowners association active.

 

[jrgators]

I'm an HOA treasurer and I file 1120-H every year. Never pay taxes since all HOA fees are spend on 'expenses'

 

[m3bs]

Thanks. I’ll have to look up that form.

 

[OldShooter]

Question #1 has to be: "Does the IRS even know you exist?" Did the HOA apply for and receive a letter confirming its nonprofit status? IIRC you would be a 501(c)7 but there are many flavors, so be sure to check/verify. (https://www.irs.gov/charities-non-profits/other-non-profits/requirements-for-exemption)

Your CPA firm should have given you the answers to your two questions. In addition they should be able to tell you what to do if you have never been approved as a nonprofit. If they cannot do these simple things, you need a new CPA.

 

[pb4uski]

If it qualifies, I think it would be a 501(c)(4) homeowner's association and not a 501(c)(7) social club.

https://www.irs.gov/government-entities/irc-section-501c4-homeowners-associations

https://www.irs.gov/charities-non-profits/other-non-profits/social-clubs

https://www.irs.gov/charities-non-p...requirements-for-exemption-limited-membership

 

[pb4uski]

I had a similar situation about 5 years ago when I became Treasurer of our lake association that had never done any IRS finilng and was flying under the radar.

First, we successfully applied for 501(c)(7). Then I filed a 990-N annually. In addition, we now have to file 1099s for certain vendors that we pay more than $600 annually... there are usually 5 or so each year.

 

[Gotadimple]

Question #1 has to be: "Does the IRS even know you exist?" Did the HOA apply for and receive a letter confirming its nonprofit status? IIRC you would be a 501(c)7 but there are many flavors, so be sure to check/verify. (https://www.irs.gov/charities-non-profits/other-non-profits/requirements-for-exemption)

Your CPA firm should have given you the answers to your two questions. In addition they should be able to tell you what to do if you have never been approved as a nonprofit. If they cannot do these simple things, you need a new CPA.

Most homeowner associations are not Non-Profits (i.e. 501(c)3) they are Not For Profit homeowner associations. At inception of the association, the developer would have filed with the state for a business ID, and with the IRS for an Tax ID. If you have an Tax ID or EIN, somewhere there is an IRS letter telling you your ID number and how you are classified. Apparently you can't do one without the other.

An association cannot set up a bank account without a Tax ID/EIN.

 

[NoiseBoy]

Yeah, a whole $5.56 per door annually.

Knowing that 100% of our income is exempt (HOA dues) so we're paying $200 to file a tax form to declare that we have no income is what bugs me. If we had income, I could live with paying a professional to prepare our taxes.

But, your comment made me realize that I'm working kind of hard to save myself less than six bucks Yeah, I think we'll just pay the CPA.

 

[OldShooter]

Most homeowner associations are not Non-Profits (i.e. 501(c)3) they are Not For Profit homeowner associations. ...

I believe that all of the 501(c)X organizations are nonprofits. 501(c)3 organizations (and maybe others) are in addition charitable organizations. Obviously a HOA is not a charitable organization.

At inception of the association, the developer would have filed with the state for a business ID, and with the IRS for an Tax ID. If you have an Tax ID or EIN, somewhere there is an IRS letter telling you your ID number and how you are classified. Apparently you can't do one without the other.

An association cannot set up a bank account without a Tax ID/EIN.

All that I know is that when I took over as treasurer of our flying club we had a TIN, bank accounts, etc. and a few $100K of assets. but we were not classified. I filled out the paperwork, wrote the $500 application check, and waited the six months to get the official letter. It was not part of the TIN process for us.

 

[Gotadimple]

I believe that all of the 501(c)X organizations are nonprofits. 501(c)3 organizations (and maybe others) are in addition charitable organizations. Obviously a HOA is not a charitable organization.

All that I know is that when I took over as treasurer of our flying club we had a TIN, bank accounts, etc. and a few $100K of assets. but we were not classified. I filled out the paperwork, wrote the $500 application check, and waited the six months to get the official letter. It was not part of the TIN process for us.

Huh. I was the treasurer for an HOA for a number of years. When I took over the position there was an IRS letter in the files providing us with the EIN.

Of course, that letter is 25 years old, so old that you can't see a version of it on the IRS database.

 

[OldShooter]

Huh. I was the treasurer for an HOA for a number of years. When I took over the position there was an IRS letter in the files providing us with the EIN. ...

I think we have apples and oranges here. The letter I have been referring to is the letter approving our 501(c)7 status. It had nothing to do with the EIN, which we also of course had. I suppose there was an EIN letter at some point but I don't remember seeing it.

 

[pb4uski]

I think we have apples and oranges here. The letter I have been referring to is the letter approving our 501(c)7 status. It had nothing to do with the EIN, which we also of course had. I suppose there was an EIN letter at some point but I don't remember seeing it.

+1 In my file I have two letters. On telling us our EIN and another informing us that we have been approved as a 501(c)(7) organization (social club). We are a non for profit corporation.