Do condo associations have to file tax forms?

April 11, 2014 7:41 PM

We just found out that there is such a thing as the 1120-H tax form for condo and homeowner associations, and the previous owners of our building have never filed. Great. We're going to start, but is this something that all condo or homeowner associations do? Were our previous owners unusually lax?

We're pretty sure the association would have never owed anything, as it's a small, 3-unit association and profits go right back into bills and building improvements. There was multiple turnover in owners/trustees so we don't have access to the knowledge of the previous owners. I realize y'all can't give legal advice, so I'm just asking if it's normal for associations to file, or not file. Like, is this an obvious, well-known thing that we were just too clueless to know about? Anonymous because IRS.

posted by anonymous to Home & Garden (7 answers total)

Review of the instructions tells you it is expected. Talk to a tax attorney or an accountant. Start, as you plan, but see what needs to be done, if anything, to make up for the last 3 years of inaction. Ask the advisor why I say 3 years.
posted by yclipse at 8:02 PM on April 11, 2014

it isn't you who were clueless, it was the responsibility of the people in control at the time. your tax attorney will assist you in making good, and the IRS can reach back after the folks who shirked their duty. right direction break and you and the current co-owners won't have to pay anything. yclipse said 3 years because that's the s/l for nonfraudulent returns. IANYL.
posted by bruce at 8:21 PM on April 11, 2014

I used to file them for my HOA condo Association. Never had to pay anything though and it always just seemed like a nuisance. There wasn't anything intuitive about it. I remember finding the forms in the treasurer's files and thinking OMG I have to to THIS? So there may be a lot of little groups that don't.
posted by SLC Mom at 8:49 PM on April 11, 2014

I pay maintenance fees and a mortgage. The latter is the only thing for which I've received tax forms.
posted by brujita at 11:56 PM on April 11, 2014

Yes, all HOAs do this. Yes, it is quite unusual that your previous owners did not.
Yes, this is an obvious thing.

There is state and federal tax law, of course. You have to file federal tax returns. State taxes, I suppose, can vary from state to state, but I would think you also have to file in most states too.

I live in Florida. There are lots of HOAs here. Over the years, there has been lots of stories of fraud and theft from HOAs. The Seinfeld episode where Morty Seinfeld is accused of embezzling HOA funds from the Del Boca Vista to buy a cadillac - that happens more than you think.

Most HOAs are broke, so for them, it is just a formality. But more HOAs then you think show a profit. And many of them have cooked books.

Florida has strict state tax laws about reporting income (or revenue loss) by an HOA. HOAs here can be so powerful that they almost become quasi-governments. There are some famous examples of this in Florida, like The Villages or Disney's Celebration City. Tax returns is one of the key ways in which the state regulates and controls these HOAs. I hope you are not in the Sunshine State, because if you are, then you have a serious issue on your hands.

If I were you, the first thing I would do is LAWYER UP !!
Seriously, talk to a tax lawyer.
posted by Flood at 6:31 AM on April 12, 2014

It's not something every individual has to file, it's something that the actual association has to file, and yes, it's normal, as is retaining an accountant to keep your books and handle the forms--the accountant's fees are part of what your maintenance fees should be covering. Take it to a CPA, they can also provide you with info about how to handle the past years that weren't filed and figuring out how to handle penalties from that, before you go as far as an attorney.
posted by Sequence at 6:37 AM on April 12, 2014

From one of the main Condo/TIC/HOA law firms in San Francisco. May be of limited utility in other locations:
What tax returns must a 2-4 unit condominium homeowners association file and what taxes must the HOA pay?
posted by zombiedance at 10:33 PM on April 12, 2014