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Do HOAs File Tax Returns?

Compliance with tax filing requirements is crucial for HOAs, as failure to do so may result in penalties. Let’s understand if you are required to file tax returns as a homeowner association and the regulations pertaining to the tax filing process.
Do HOAs File Tax Returns?
Homeowners' associations (HOAs) are required to file tax returns because they are considered corporations in the eyes of the law. Here's everything you need to know about homeowners association (HOAs) and related tax regulations.
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Regarding federal taxes, a homeowners association (HOAs) is considered a business. Even if it is a non-profit, the association must file taxes like any other corporation. However, just because filing a tax return is required for an HOA, it may be required to owe any tax. Let’s find out if HOA’s file tax returns. Also, check out the Beem Income Tax Calculator and Return & Refund Estimator which operates on a sophisticated algorithm aimed at providing an accurate estimate of your tax situation. 

Do HOAs Need to File Tax Returns?

Homeowners associations (HOAs) must file tax returns because they are considered corporations. Therefore, even if they are labeled as nonprofits according to state rules, they still have to give money to the IRS. However, certain situations exist where a particular HOA registers as a nonprofit and gets approval from the IRS. It might recognised as such, and in these cases, they might not have to pay taxes.

What Does Law Say About it?

In the eyes of the law, HOAs are considered corporations. As corporations, they are required to file tax returns. The form used explicitly for this purpose is known as Form 1120-H, which was designed specially by the Internal Revenue Service (IRS) for HOAs.

Understanding HOA’s Tax Filing

Compliance with tax filing requirements is crucial for HOAs, as failure to do so may result in penalties. HOAs should stay informed about any changes in tax laws that might affect them and seek professional assistance to navigate the complexities of tax filing.

When Should HOA File Taxes?

A homeowners association is seen as a nonprofit group. Checking the fiscal year is essential to determine when HOA taxes are filed. For example, if your fiscal year ends on December 31, you must finish your tax returns before March 15. So, getting everything sorted for your homeowners’ association tax filing is essential before that deadline rolls around.

What Happens if a HOA failed to file tax returns

If an HOA fails to file tax returns or doesn’t pay its taxes on time, it could lead to a considerable fine. The penalty is 5% for not filing tax returns on time every month. The return is overdue but won’t go above 25%. There’s a penalty of 0.5% for each month the taxes were unpaid or not paid on time. In addition to this, the IRS also adds interest to any due taxes. 

Conclusion

HOAs have to file tax returns because they’re seen as companies. Some nonprofit HOAs might not have to, but following the rules is essential. Form 1120-H makes it easier. Knowing tax rules, filing on time, and getting help from pros are vital to avoiding fines. Beem is here to help you with comprehensive solution for your tax filing queries.

FAQS

Does HOA Need to File Form 1120-H Every Year?

An HOA must qualify by submitting Form 1120-H before the 15th day of the third month following the end of its tax year. 

What are the Tax Exemptions for an HOA?

HOAs, despite being non-profit, are not automatically tax-exempt. However, they can seek federal or state tax exemption. Achieving federal tax exemption involves obtaining 501(c)(4) or 501(c)(7) status, though it’s challenging and uncommon. 

What’s the difference between HOA 1120 and 1120-H?

Form 1120-H is an IRS tax form for homeowners associations. Form 1120 is complicated, unlike Form 1120-H, which is much simpler. Form 1120-H is easier to fill out because it’s more straightforward than Form 1120. When HOAs use this form, there’s also less chance of being audited than other non-HOA corporations. So, choosing Form 1120-H can make things easier for HOAs regarding taxes.

Is 1120-H tax-exempt?

Form 1120-H is not tax-exempt but is explicitly designed for HOAs to help them qualify for certain tax benefits.

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Author

Picture of Fatema Yusuf

Fatema Yusuf

A passionate writer, who loves to write about anything and everything. She usually writes about finance and investment options. She enjoys talking about personal development and loves to help people grow. she loves to cook for kids and upcycle old stuff to give them a new life.

Editor

This page is purely informational. Beem does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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