Home Owners' Assoc. Form 1120H

[WhiteOleander]

New client came in today wanting to file for a Home Owners' Assoc. They have never filed before. It has been operating since 1997.
They are on a fiscal year ending April 30.
I am having difficulty finding much info about HOAs. If I understand what I have read, they cannot file the 1120H because it will not be a timely filed return. Also, he insists that they are automatically non profit and therefore tax exempt. I don't find much info on this either.
Is there a reason the IRS might not have contacted them about the previous unfiled years.

Any help or pointers would be appreciated. I had one CPA tell me that HOA's had to be audited each year. Not sure if this is a legal obligation or not.

Thanks.

[Bird Legs]

Homeowners Assoc.

You are correct. One requirement for using the 1120H is the tax return must be timely filed, including extensions. See 2004 Business Quickfinder Handbook page F-7.
Also, you may be able to get more info by doing a Google search. Type in "Taxation of
Homeowners Assoc." and see what pops up.

[JON]

Ppc

Homeowners ASSN is a two volume set. 1120 I hope they have loses..

[WhiteOleander]

Thanks y'all for the info.

I don't really know if they have losses. The gentleman who came in is elderly and says he doesn't think he has much on the prior years. Maybe back to 2002.

Oh well, that what makes this work interesting.!!!!

[lsmith]

1120h

1. Should be a calendar year.
2. Be provided with Income & expenses. Interest seperately stated.
3. can file as an H or A.
4. As long as expenditures are greater than income, it is a loss. If it is a loss and interest income is less than exemption amount, no taxes due.
5. Filed by 3/15/xx or if fiscal Year, other rules apply and additional monies(excise taxes) paid within time period specified.

[WhiteOleander]

Please advise where the info is relating to requiring a calender year. They were set up originally as a fiscal year. But since it appears they never filed any returns, perhaps that is not in comcrete yet.

Also, this only gets worse. I now am finding, as I go through papers, that they apparently have two EIN #'s. I haven't been able to get anyone from the BOD to answer any questions. If I bring up something, the reply is "Oh that must have happened before I came here."

[Bees Knees]

Please advise where the info is relating to requiring a calender year. They were set up originally as a fiscal year. But since it appears they never filed any returns, perhaps that is not in comcrete yet.

Calendar year is not a requirement, otherwise form 1120-H http://www.irs.gov/pub/irs-pdf/f1120h.pdf would not give you the option of using a fiscal year at the beginning.

But even if it is a fiscal year, it still has to be filed on time, including extensions to make the 1120-H election. Otherwise you are stuck with an 1120, taxed as a C corporation.

[lsmith]

1120H returns

You are correct knees..neither is the franchise tax applicable. Although I have prepared many, they have all been calendar year, since usually they are calander year operations which coincide with bank statements, interest payments, receipts, etc. One thing to look out for on these, is you might have to find information to issue 1099's to those who have subcontracted to perform necessary tasks, lawn maint, pool maint, etc. Those are due at the regular times. The BOD should have the books audited annually as well.

[Unregistered]

Same Boat

I am in the same situation. Client called and ask me to do the bookkeeping for a H.O.A. Their's is a small organization so I said o.k. Now I find out there has never been a tax return filed and the prior manager said the paper for a Corp were filed with the state sometime in 2000. Not sure of the month or day.So if I read the post right the option for 1120H is not a option. What about the nonprofit status.Client said they were nonprofit but don't know is anything was filed on this.Would you file as a nonprofit org or as 1120C and be taxed.

[Bees Knees]

A homeowner’s association is not a non-profit organization. There is no public interest served in a group of homeowner’s deciding to pool money to pay for common expenses, which is basically what a homeowner’s association is all about.

You don’t need to incorporate with the state. The federal 1120-H or 1120 is treated as a corporation for federal tax purposes, even if it is not a corporation for state liability purposes. Although, I would advise incorporating with the state to protect the homeowner’s from liability.

If tax returns were not filed, you have a lot of over due 1120 returns to do for all back years. If there is no profit, then don’t worry because the 1120 would simply produce NOLs to carryforward.

[Donanita]

1120h

Haven't got this quote thing down yet by as Bees Knees quoted(a homeowner's association is not a non-profit organization) is you file the 1120H you can exclued the total exempt function income is all the test are met.

[WhiteOleander]

Thanks all for your replies. My boss and I have decided to let this HOA on go in search of a different preparer.

The "books" are no where near adequate. We can't get answers from anyone. And they sqwaked when we gave them an estimate of the fee.

Life's just too short.

[Lion]

1120h

I've had homeowners' associations come to me after already filing 1120Hs in prior years, but changed treasurers so changing preparers and coming to me late. I've filed as 1120H and they've been accepted, even though late. Even CT, which charges $50 for late filing, returned their $50! But, they had filed 1120H in prior years. Your situation seems to be that it's now too late to make the H election. If no tax difference, just file as 1120 now for late years and 1120H for the first on-time year and thereafter. If they'd owe less on an 1120H, then it's worth a try filing that way with an explanation -- volunteer organization, change in officers, no history to follow, blah, blah, blah, have now retained professional tax advisor, instituted procedures in the minutes to remind of and track required federal and state filings, blah, blah, blah.... Good luck.