1120-H question

[Unregistered]

filing my first 1120-H, client sent me a set of
financials for the hoa...shows 166K income from
members/owners and 163K all hoa related expenses.
looks like to me only the first couple of lines on the
1120-H needs to be filled out...am i right....thats it??
all tax exempt income and no tax on the 3K not expensed.
(according to my software anyway)
also balance sheet shows 35K cash 1400 a/r with 2500 a/p
and the rest as retained earnings....does the balance sheet need to be
filled out or not. thanks....sheesh how much can i charge for this? 8-)

[Uncle Sam]

1120-H Question

I have a few Homeowner Association Clients so perhaps I can help you.
First of all, the filing of the 1120-H is an annual election. The corporation, assuming it's a regular taxable corporation, would ordinarily be filing form 1120. You should also be filing a state tax return. Each year it is determined on its own, depending upon the financial results if it's beneficial to file the 1120-H instead of 1120. For example if there's an overall loss for the year then it would probably benefit the HOA to file the 1120.
Now, regarding the computation of the taxable income.
For purposes of reporting, you must break out all of the income, and all of the expenses into two columns - Column 1 - Organization Exempt Purpose Income (Expense)
Column 2 - Organization Non-Exempt Purpose Income (Expense)
The exempt purpose income includes the common charges collected from unitholders, move in/move out fees, and those associated directly with the operation of the building.
It does NOT include earnings on investment income, late fees (although this might be questionable), miscellaneous fees from vendors - such as cable companies, rental income from other non-residential tenants such as laundry machine vendor, storage fees for individual bins.
Likewise, with regards to expenses, direct expenses include managing agent fees, real estate taxes, repairs and maintenance fees, building employee salaries, permits, building employee benefits.
Items such as bank charges, accounting and legal fees, corporation taxes - would be considered non-exempt purpose expenses since they're considered administrative. These items can be allocated exempt/non-exempt based on your judgement and discussing this with the management board -as to how much, or what percent of these items apply directly to the operation of the building.

Form 1120-H does not report a balance sheet like Form 1120.
Hope this helps.