Many associations mistakenly assume they don’t have to file tax returns. This article explores tax filing for condo associations and what you should expect when your association files taxes.
HOAs and Taxes
A common question we typically get is, “Does our condo association have to file tax returns?”
The short answer is YES. Whether residential or commercial, all HOAs and condominium organizations must file federal tax filings. Most states also demand the filing of a state income tax return.
Your condo association should have an Employer Identification Number (EIN) or tax ID and file federal, state, and local tax returns on behalf of the association.
The EIN is a unique number assigned by the Internal Revenue Service. It is like a social security number but for businesses.
If your condo association does not have one, or it does, and you’re unaware of it, please check and make sure you know. In our experience, we have taken over associations with the property manager and never even knew that you had to file tax returns.
How to File Your HOA’s Tax Returns
We know filing taxes can get tricky, and you may be wondering what form to file.
It’s called the 1120-H. Filling it out is simple, and there aren’t too many numbers. But you would want your bookkeeper to go through all your accounts, such as an operating or reserve account. Make sure all accounts are reconciled.
From your bookkeeper, the work then proceeds to your certified public accountant (CPA). The CPA will compute, put everything in the form, and review it.
Unlike personalized returns, there isn’t a lot of money. A lot of budgets typically will have the bare minimum. Some associations even lose money (but remember, that’s not the goal!). But at the end of the day, there shouldn’t be too much money that needs to be filed.
Even so, you want to make sure that you file your HOA’s tax returns.
The Boston HOA Guarantee
If you or anyone else you know is looking for a proactive property manager to ensure that your condo association and tax returns are taken care of and done properly, please think of Boston HOA Management.
