Neighborhood associations

[oceanlovin'ea]

One of my clients just called and asked me if I could come to a meeting she has set up with a number of neighborhood associations that will be attending.

They want information on what kind of entity they should be, if they should incorporate, how to get an EIN, what kind of records they need to keep, what the difference is between not for profit and non-profit.

I do one return for a homeowners association and that one is very simple.

The meeting is Saturday and I told her I would call her back tomorrow and let her know if I can come.. Can anyone help me with some of this information or where I can find out more?

Any help will be greatly appreciated.

Linda F

[jerome]

Basically, for federal tax purposes an association is taxed as a C corporation regardless of whether or not the association has filed state incorporation papers. That is the default.

Certain homeowner’s associations may qualify under the right conditions to elect homeowner’s association treatment by filing Form 1120-H. It has the advantage of not having to pay any tax on membership dues, fees, or assessments. However, it does have to pay a flat 30% rate on income that is not exempt function income (such as interest, dividends, etc.). The tax book, page 18-16 discusses some of the rules.

Non-profit organizations have to serve some kind of public good or charitable purpose. An association that does not make a profit is not automatically considered a non-profit organization. There are certain standards that must be met. The tax book page 22-7 has some information on tax-exempt organizations.

Without meeting one of these special rules, a neighborhood association organized to collect money and pay certain expenses would have to file Form 1120 as a C corporation.

[oceanlovin'ea]

Need more info

Do you know where I could find some articles on the subject?

Thanks

Linda F

[Bird Legs]

Try this for more info

Go to Google search and type in: IRS reporting and taxation of Neighborhood Assoc.

[Gretel]

Linda,

I just did a return for a homeowner's association. I would recommend to also take a close look at the 70-604 election. If they plan to accumulate some income for bigger projects you need to know about this.