1099-Misc

[manyhappyreturns]

I took over a small bookkeeping job recently for a homeowner's association. They are basically non-profit, although they do have a teeny bit of taxable income, like $300 or less per year. They pay a gardener $75/month, and have hired other contractors on an as needed basis for repairs and stuff, but the bookkeeper before me said she has never 1099-ed the gardener or any of the others because a tax accountant she consulted said she didn't have to. I can't see anything in the 1099 instructions that says they are exempt, but I don't usually deal with nonprofits, or any corporations for that matter. So, does anyone know if I should be sending out 1099s?

[Uncle Sam]

1099-misc

Hold it -
A homeowners association is NOT tax exempt.
There is quite a bit of confusion about this. Unless the association is connected somehow to a tax exempt organization, it is a taxable entity.

Where the confusion comes from - is the organization can make an ANNUAL election - if it's a taxable C Corporation - to file Form 1120-H - where the items that become taxable and deductible - are P & L items NOT related to their normal operating activities as a homeowner association. And even then there are rules pertaining to if it QUALIFIES to file the form - it has to meet 60% of exempt function income, 90% of exempt function expenses.

With regard to the various service providers - yes, they need to have 1099-MISC filings.

[manyhappyreturns]

Their income is well over 90% dues, which goes to operating expenses, such as utilities, maintenance, taxes, insurance, professional services -- so that income is not taxable. They also have an annual taxable income of under $300 from a coin-op laundromat on the premises, and they file an annual 1120-H and pay a few dollars tax on that income.

When the former bookkeeper told me that a tax accountant told her she didn't need to file 1099s for them, it didn't make sense, because that would be taxable income for the gardener and other contractors. I'm hoping they have tax ID #s and that they've been declaring that income even without the 1099. If not, they may be in for a shock here pretty soon.