HOA Taxes Not Paid

Started by DavidT3 • 4 replies • 2171 views

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DavidT3 (Texas)
Posts: 18

Posted:

I have recently been elected as President of our HOA - I had a stack of forms handed to me by the previous board that shows that we have never filed a tax return for the Association. We received an Employer ID number in 2002 when the association was started, but it looks as if we have not done anything since.

Has anyone had this same issue come up and what is my next step to get this resolved? Any help of direction would be appreciated.

Thanks

GlenL (Ohio)
Posts: 5,491

Posted:

I would consult a CPA to file all the back taxes. There are no penalties if you don't owe anything and it's doubtful the assn. owes any taxes since all the assessments are classified as "exempt" income and are not subject to taxes unless you receive a lot of interest on money that is in your reserves.

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RogerB (Colorado)
Posts: 5,067

Posted:

David, using IRS form 1120-H you probably only owe 30% on interest income over $100 plus penalty if taxes were owed. You can contact the IRS for assistance. The form is easy to complete and can be downloaded.

MicheleD (Kentucky)
Posts: 4,491

Posted:

Roger, that's a good suggestion, re: IRS and downloading form, however, since there has been no filing at least since 2002, I would strongly second Glen's advice to contact a CPA and have him/her handle the matter to get the association up-to-speed and "legal" with the IRS. There are also very likely state tax forms that need to be handled/dealt with as well.

We ran into a very similar situation when it was discovered that one of our treasurers did not file our taxes for 3 years at least.

TO resolve the issue, we turned it all over to a CPA, and while most years we were okay, one year we did rise to a threshold where we ended up paying a modest amount.

You forfeit your tax-exempt status on the "tax-exempt" income when you fail to file the taxes properly within so many months (an automatic extension, of sorts), and even assessment income becomes "taxed" in those years where you did not fail and missed the extension deadline.

So, certainly, a CPA would be the best person to be able to help you wade through it.

SusanW1 (Michigan)
Posts: 5,202

Posted:

I have stated this many times: A good audit review, which can be conducted by a resident group, makes sure that the following is in a binder and in the possession of the secretary until the next secreatary is elected:

Copies of:
Original Articles of Incorporation
CCRs
Bylaws (with dated amendments added)
Rules and Regulations or Standing Rules.
Approved Budget
Minutes of the Board meeting, with attached financial reports (3 years)
Minutes the Annual Meeting of the Members, with approved financial report
Annual Reports for the lat 5 years (3 years)
IRS filings for the last 5 years
Copies of newletters, board communications to members.
Name, address and contact number for all board members
Terms of all board members
Offical copy of members in good standing of the association.

The audit review can then go into the financial records. Validate large expenditures as being validated with Board or member motions from the minutes, if needed.

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