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Form 1120-H CPA discusses HOA and COA Tax Preparation | Home Owner’s Association and Condominium Owner’s Association

IRS tax Form 1120-H tax preparation by a Wilmington NC CPA

Gary Bode, CPA: if your HOA or COA needs to prepare Form 1120-H, Form 1120 or Form 990, please consider calling us at 399-2705 for a free initial phone consult

Form 1120-H CPAs usually recommend using Form 1120-H if possible. It’s the simplest tax preparation choice for Home Owner Associations (HOA) and Condominium Owner Associations (COA). Hi, I’m Gary Bode, a Form 1120-H CPA with a virtual office to serve long distance clients. Your HOA or COA has to file a tax return every year, even if it had no income and owed no tax. Go figure! Here are the IRS requirements for using Form 1120-H for your HOA or COA.

IRS Requirements to Utilize Tax Form 1120-H

  • At least 85% of the units have to be residential. This forces most commercial developments to use tax Form 1120, a much more complex tax return requiring a Balance Sheet component. Form 1120-H is the way to go if possible.
  • At least 60% of the gross income of the association has to be exempt function income. Exempt function income sounds esoteric, but it just means membership dues, fees, or assessments from owners used to pay 1) general maintenance expenses for association property 2) real estate taxes 3) principal and interest on a related loan.  Examples of non-exempt function income include:
    • Dock fees from non members.
    • Income from a communal laundry room.
    • Renting out the community event room to non members.
  • At least 90% of the association’s expenses have to be used to improve or maintain its property.
  • No person can “profit” from the Home Owners Association or Condominium Owner’s Association.

Form 1120-H uses the “exempt method” of reporting, under IRS code section 528. The tax rate is 30% but there is a $100 annual exclusion. Time shares pay 32%.

I’m a Form 1120-H CPA offering a free initial phone consult.  Please call (910) 399-2705. If there is underlying QuickBooks bookkeeping that requires finalization before tax preparation, we’re happy to help with that as well.

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7 comments to Form 1120-H CPA discusses HOA and COA Tax Preparation | Home Owner’s Association and Condominium Owner’s Association

  • RICHARD A GRIMES

    I’m looking for a 2010 pdf irs form 1120-H. Only 2009 are listed on the irs website.

  • free credit check online

    Keep posting article like this i truly like it

  • J. T. Britt

    “Form 1120-H uses the “exempt method” of reporting, under IRS code section 528. The tax rate is 30% but there is a $100 annual exclusion.”

    I thought fees / dues / etc. from members were exempt and that fees from non-members were taxed at 30%.

    We may need your services. We have never filed anything with the IRS. (Didn’t know we were supposed to since we were non-profit. Until recently.) We are an old POA that was basically defunct until a few years ago. Since then we have made vast improvements and collections are way up. In fact, we built boat slips and members can use one for an annual fee. Annual income is in the $8,000 range with about $6,000 in expenses. (road work, upkeep, etc.)

  • Brad Jones

    If our HOA is filling the Federal 1120-H, which State of NC form do we have to file annually?

  • Hey Gary, My name is Todd Smith. I own a unit in a small office condo complex. I went to sell it and the closing attorney said that the POA was “revenue suspended.” I called the NCDOR and they said that no tax returns had been filed since 2007 (when the Company began.) No one in the association knew that returns had to be filed every year. No money was ever made by the POA except “dues” to pay bills. Some years the POA borrowed money (from me) to pay the bills. Other years there was a slight excess. Now I have to get this straight before March 22 in order to close on the property. Can you help with this? How much? (I have to talk with the POA members to get the money.) We don’t even have a Fed Tax ID number.

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