How many HOAs comply with the IRS requirement for 1099s for services from contractors and sole-proprietors

I learned of this, https://www.irs.gov/charities-non-profits/information-returns-forms-1099 this year. I informed my POA's Board around April of 2019 and reminded them again recently. Their answer was no other Boards did it so they are not.

I suppose this IRS requirement is not widely known, or while I think it would apply to most HOAs/POAs since they are normally organized as non-profit entities under IRS policy, perhaps it does not apply to them - anyone know for sure?

This could be very costly, since the IRS rule states if you do not obtain tax identification numbers from non corporation entities that provide $600 or more of goods or services to your non-profit, you must withhold 28 taxes from payment to them. If the IRS pursued this against a non-profit, it would imply this withholding was done and charge the non-profit for it, plus fines and interest, regardless if the withholding was actually made - in which case the entity would just be out that extra money it did not collect.

Some questions to other POAs and HOAs:

1) Do you comply with this law and process these 1099s for $600+ services obtained from non-corporations?

2) If not, do you not do so because you did not know about the law? Or you decided to ignore it, if you did know about it? Or perhaps a tax or legal advisor advised that it is not applicable to you?

Here is the actual law/policy per the IRS site:

A tax-exempt organization must file required information returns, such as Form 1099-MISC (PDF). An organization does not withhold income tax or social security and Medicare taxes from, or pay social security and Medicare taxes or federal unemployment tax on amounts it pays to an independent contractor (non-employee). Generally, if the organization pays at least $600 during the year to a non-employee for services (including parts and materials) performed in the course of the organization’s business, it must furnish a Form 1099-MISC, Miscellaneous Income to that person by January 31 of the following year.

The tax-exempt organization will need the social security number or EIN of an independent contractor to complete Form 1099-MISC. If the independent contractor is a sole proprietor, the SSN is preferred. The organization should always ask the independent contractor to complete Form W-9, Request for Taxpayer Identification Number and Certification (PDF), before beginning work.

If the tax-exempt organization does not obtain an SSN or EIN before the organization pays the contractor, the organization must withhold income tax from the payment, generally referred to as backup withholding. Backup withholding rules require that 28 percent of the payment be withheld, and reported on Form 945, Annual Return of Withheld Federal Income Tax (PDF).

Note: Do not report payments to corporations on Form 1099-MISC unless reporting payments for medical, health or legal services. Refer to the General Instructions for Forms 1099, 1098, 5498 and W-2G (PDF) for more information on 1099 reporting and withholding requirements.

Ongoing Grass cutting - 2 different people/groups cutting different areas of subdivision throughout the year.
Occasional sprinkler/irrigation work
Occasional/seasonal landscaping work

So it sounds as if many in your are complied? Mostly non-profits or corporation buying the forms?

I just researched it. The forms are in triplicate form and an entity cannot just print them. I also found that attorney services, if normal course of business, require 1099s if over $600 regardless if the attorney is incorporated or not - a special rule for attorney services.

I am not on the Board. I informed the Board about it in April 2019 and again at the beginning of this month. They never responded to me. I noticed in the minutes to their April Board meeting, when I originally informed them it needed to be done, the Board decided since no other Board did it they were not going to do it either. That is what is in the minutes.

I plan to bring it up at the General Meeting asking why they refuse to do it. I would like to get it into the minutes again, so if the IRS does ever catch the association for it, members could make a case that the Boards, which refused to do it, should pay as individuals since they are the ones refusing and not the overall membership. We are a fairly small association, ~50 members/homes and yearly total expenses are about $15K. Based on the financial statements, I calculated the 2019 penalty and implied tax withholding would be around $4200 for 2019 alone. That would would be over 25% of the whole budget of the association. Again, I feel the membership should not bear that if a Board of 5 refuses to do it when they have been informed it is required.

Board members tend to get a fair number of ideas and suggestions for projects, meaning that the board would have to take on these projects and spend time on them. It's somewhat understandable that they get resistant to doing extra work. You are right that it needs to be done. If you volunteer to do it for them (and for your community), they may accept. This is a pretty simple project that won't take much time (about the same amount you are spending here).

Do you know whether these two different groups have submitted EINs or SSNs?

By any chance, given your proximity to the border, does your objection have anything to do with using folks who may not reside in the United States lawfully? And you think the HOA is abetting this?

Right now my bigger concern is that some person cutting the grass or digging to repair an irrigation system gets hurt and sues the HOA. Do you think these two groups have insurance? I see Texas does not require companies to have workers comp. To me this translates to bigger risk for the HOA.

Great opportunity to volunteer?

Roger,

It shouldn't matter what other HOAs are doing or not doing.
It also shouldn't matter what is the norm.

What matters is what is required by the tax code.

The software and forms are $15 to $20, depending where you purchase them.
Time to fill out, probably no more then an hour for first time users.

She quit instead of paying her fair share of taxes?

The one person who would not give an SSN/EIN is now gone. Is the above an issue you want to discuss further here? If so and fwiw, I think keeping the books, managing the taxes et cetera, even on a hoa that has minimal contracts and expenses, and only a $15k budget, with about 50 members, is a lot of work. If the treasurer is all your HOA has handling the books, then first, I would be somewhat sympathetic, and second, I would be concerned about his competence. If I were on your board and others agreed, I think I would ask the board for an okay to contact a few accounting firms or property mangers and see what they would charge, possibly doing the aforementioned, contracted-out, secretary's duties as well.

Help out on the projects?

Volunteer to be on a committee?

Run for a Board Director position?

This is the way we handle it.

The association used form 990-EZ for many years for its no-profit tax reporting requirement. The current treasurer uses 990-N which is even more condensed - it is nicknamed the e-postcard form. I just looked over the 990-EZ. It only mentions 1099s in two places, places for employees and officers' compensation, both of which would be $0. I see nowhere where it asks if about payments that would trigger 1099s. The 990-N is an all electronic input form - no actual form, so I can not check it.

Our PM handles all of this but I think the OP might be overly concerned.