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Message
Tax Return for Condo Association
Posted on 1/26/17 at 7:13 pm
Posted on 1/26/17 at 7:13 pm
I live in a small six unit condo building. To my knowledge the association, which has been in existence since 2007, has not filed any tax returns.
A few questions:
Can we start filing this year and ignore the past years or do we need to file returns going back to 2007?
Do condo associations typically owe tax or is the return informational only?
I’m a relatively smart business-minded person and I know my way around a 1040 pretty well. Would I be able to compile the return on my own or should we hire a professional?
Thanks in advance.
A few questions:
Can we start filing this year and ignore the past years or do we need to file returns going back to 2007?
Do condo associations typically owe tax or is the return informational only?
I’m a relatively smart business-minded person and I know my way around a 1040 pretty well. Would I be able to compile the return on my own or should we hire a professional?
Thanks in advance.
2
Posted on 1/27/17 at 12:24 am to Amory Blaine
Condo and homeowners associations are typically legally structured as a corporation. If it meets certain tests, it is able to file Form 1120-H.
The two tests are: At least 60% of the revenue must be exempt function revenue - basically dues and assessments, and at least 90% of expenses must benefit the property or the management of the property.
The tax is 30% on taxable income.
However, you have to file the return timely. You can generally get an extra 12 months if you ask for forgiveness. So likely, 2016 is fine, and 2015 you can beg for forgiveness.
If you don't file 1120-H timely as above, then you have to file Form 1120. You can also file Form 1120 if the tax is less than it would be on Form 1120-H.
As far as whether you should file back returns... they are due and the statue doesn't run until a return is filed. I can't advise you on whether you should or should not without a full understanding of your situation. But filing a return will likely put you back on the IRS radar, and it's possible that they may ask you for the past returns.
The two tests are: At least 60% of the revenue must be exempt function revenue - basically dues and assessments, and at least 90% of expenses must benefit the property or the management of the property.
The tax is 30% on taxable income.
However, you have to file the return timely. You can generally get an extra 12 months if you ask for forgiveness. So likely, 2016 is fine, and 2015 you can beg for forgiveness.
If you don't file 1120-H timely as above, then you have to file Form 1120. You can also file Form 1120 if the tax is less than it would be on Form 1120-H.
As far as whether you should file back returns... they are due and the statue doesn't run until a return is filed. I can't advise you on whether you should or should not without a full understanding of your situation. But filing a return will likely put you back on the IRS radar, and it's possible that they may ask you for the past returns.
Posted on 1/27/17 at 12:27 am to Amory Blaine
HOA's file 1120-H tax forms and you can probably fill it out yourself as long as you know the income and expenses for the year which show the net income. Worst case scenario is get a CPA firm to do it the this year and then you could just duplicate their work in later years.
Posted on 1/27/17 at 9:40 am to Serraneaux
Just to piggyback off of the other responses, in Louisiana you will probably have to pay a Franchise Tax to the state based on the association's equity. It's stupid because you need to build a reserve for future repairs and FHA approval, but the more you have the more tax you will have to pay for having the reserve.
Posted on 1/27/17 at 8:39 pm to Weekend Warrior79
I was on my HOA in Florida for 3 years and we were a non-profit. We had to put like 10% of our dues into escrow and then we had to spend within 10% of our budget or anything under that was considered taxable. So basically every year we had to figure out of we needed to spend some money or change our budget for the next year to escrow more.
I'm not sure how that helps the OP, but I know for a fact we were a non-profit. This was a 130 lot housing neighborhood so maybe that's different from condos.
I'm not sure how that helps the OP, but I know for a fact we were a non-profit. This was a 130 lot housing neighborhood so maybe that's different from condos.
Posted on 3/7/17 at 7:31 pm to LSUFanHouston
Thanks everyone. I'm fairly confident in my ability to complete form 1120-H so I will give it a shot this year.
Do I need to file a Louisiana return as well? If so which form?
Do I need to file a Louisiana return as well? If so which form?
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