Tax advice & compliance
Our 100% focus on community associations
ensures we’re positioned to address tax issues.
Tax engagements are frequently completed in conjunction with an audit or review engagement. Upon completion of the other services, our tax team will prepare the association’s tax returns. We also perform tax-only engagements.
Federal Tax Returns
Most residential community associations file form 1120-H annually. In some cases, residential associations can file form 1120. For a small group of associations that are federally exempt under code section 501(C), form 990 and in some cases form 990-T is filed. Commercial associations file form 1120.
Our team of association tax experts selects the tax return that is most appropriate to file for your association. Considerations include taxable income, allowable deductions, tax code, excess funds held by an association, tax rate and risk of Internal Revenue Service inquiry or audit.
Generally, assessment income from owners is not taxable. Filing form 1120-H will not result in tax on assessment income. However, filing form 1120 may result in tax on member assessments in excess of expenses incurred on behalf of members. Annually, we recommend that associations obtain the owners’ approval to adopt Revenue Ruling 70-604. If an association chooses to file form 1120 it is important to understand the limitations of Revenue Ruling 70-604.
What is taxable?
For most residential associations, taxable income comprises income
from sources outside of the association’s members (owners).
Examples include bank and/or investment income, cell tower
lease income, laundry rental income, sale of a unit.
Important information your preparer will need:
- Financial statements
- General ledger
- Taxable income for the year including interest income, sales of assets, other income from external sources.
- Prior year tax return credits or underpayments
- Estimated tax payments made during the year
- Payments with extensions