accounting

Started by JC3 • 7 replies • 1351 views

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JC3
Posts: 290

Posted:

Does the IRS (or any other agency) require an hoa to stay with the method of accounting that it started the year with, to the end of the year?
Can an hoa change from one method to another after a few months into the year?

MaryA1 (Arizona)
Posts: 7,043

Posted:

JC,

The HOA can use the cash or accrual method of accounting without approval from the IRS. However, after you've set up your accounting method and filed your first return, you must then get approval from the IRS to change the method. You may have to file a special form to request the change. For more info, go to the IRS website and search under "accounting method".

JC3
Posts: 290

Posted:

we have been using accrual based. We want to change NOW-today- with our new management, and they are telling us we have to wait until January. Is that true?

GlenL (Ohio)
Posts: 5,491

Posted:

JC since you didn't like Mary's advice I'll try it from another prospective; contact your CPA or the IRS and ask them. If the MC is advising that you can't do it now then you probably can't; no matter what you WANT.

Studies show that 5 out of 4 people have problems with fractions

JC3
Posts: 290

Posted:

excuse me?
Geez, I HATE it when people decide what I like and don't like.
While you were answering, I found this:
Change in Accounting Method
Generally, you can choose any permitted accounting method when you file your first tax return. You do not need to obtain IRS approval to choose the initial accounting method. You must, however, use the method consistently. from year to year and it must clearly reflect your income.
Once you have set up your accounting method and filed your first return, generally, you must receive approval from the IRS before you change the method. Approval required. The following are examples of changes in accounting method that require IRS approval.
A change from the cash method to an accrual method or vice versa.
For additional information, see the Instructions for Form 3115.

JC3
Posts: 290

Posted:

that was based on Mary's advice...

MaryA1 (Arizona)
Posts: 7,043

Posted:

JC,

I don't know why the prop. mgr. is saying you have to wait til Jan. I would suggest getting the paperwork in now and perhaps you'll be all set to make the change at the start of your next fiscal (Jan?). Your prop. mgr. may not be aware that IRS approval is required.

DeeB (Arizona)
Posts: 18

Posted:

JC,

Before you fill out any paper work and send it in you should really talk to a CPA.

Please go to the following link. It is the instructions for Form 3115, "Application for change in Accounting Method". http://www.irs.gov/pub/irs-pdf/i3115.pdf

There are two ways to apply for an accounting change with the IRS.

1) Automatic Change Request. The Form 3115 is sent in with your timely filed tax return for that year you are seeking the change. There is a list of changes that qualify for the automatic change request. There are also limitations to using this request. These qualifications and limitations are listed in the link mentioned above. If you qualify for this request method, your accounting for the whole year must reflect this change. Your management company may be unwilling to do this if you are asking for a change and they have already issued monthly financial statements under your prior accounting method. They can still do this but will need to recall and reissue any financial statements they have already issued and it will need to be at the associations cost.

2) Advance Consent Request. This has to be sent in before the end of the year in which you are seeking the change, and you must receive verification from the IRS to their approval of the change before you implement it on any tax form.
If you qualify for the automatic change request, you can not use this request. There are also limitations to using this request method as well, also detailed in the above link.

You should never blindly fill out forms and send them in to a taxing agency without being aware of the instructions and regulations, a CPA can help you with this.

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