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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.

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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