Table of Contents
- Purpose of Form
- Electing To File Form 1120-H
- When To File
- Who Must Sign
- Where To File
- Paid Preparer Authorization
- Other Forms and Statements That May Be Required
- Assembling the Return
- Accounting Methods
- Change of Tax Year
- Rounding Off to Whole Dollars
- Payment of Tax (Line 24)
- Estimated Tax and Alternative Minimum Tax
- Interest and Penalties
A homeowners association files Form 1120-H as its income tax return to take advantage of certain tax benefits. These benefits, in effect, allow the association to exclude exempt function income (defined later) from its gross income.
A homeowners association elects to take advantage of the tax benefits provided by section 528 by filing a properly completed Form 1120-H. The election is made separately for each tax year and generally must be made by the due date, including extensions, of the income tax return.
This extension does not extend the time to pay the tax.
Once Form 1120-H is filed, the association cannot revoke its election for that year unless the IRS consents. The association may request IRS consent by filing a ruling request. A user fee must be paid with all ruling requests. For more information on ruling requests, see Rev. Proc. 2015-1, 2015-1 I.R.B. 1.
If the association does not elect to use Form 1120-H, it must file the applicable income tax return, for example, Form 1120, U.S. Corporation Income Tax Return.
A homeowners association should compare its total tax computed on Form 1120-H with its total tax computed on Form 1120. The association may file the form that results in the lowest tax.
A condominium management association organized and operated to acquire, build, manage, maintain, and care for the property in a condominium project substantially all of whose units are homes for individuals.
A residential real estate management association organized and operated to acquire, build, manage, maintain, and care for a subdivision, development, or similar area substantially all of whose lots or buildings are homes for individuals.
A timeshare association (other than a condominium management association) organized and operated to acquire, build, manage, maintain, and care for the property that has members who hold a timeshare right to use, or a timeshare ownership interest in, real property of the timeshare association. A timeshare association cannot be a condominium management association.
At least 60% of the association's gross income for the tax year must consist of exempt function income (defined later).
At least 90% of the association's expenses for the tax year must consist of expenses to acquire, build, manage, maintain, or care for its property, and, in the case of a timeshare association, for activities provided to, or on behalf of, members of the timeshare association.
No private shareholder or individual can profit from the association's net earnings except by acquiring, building, managing, or caring for association property or by a rebate of excess membership dues, fees, or assessments.
The association must file Form 1120-H to elect under section 528 to be treated as a homeowners association.
The association holds,
The association's members hold in common,
The association's members hold privately within the association, and
Is owned by a governmental unit and is used to benefit the unit's residents.
Gross income for the tax year, excluding exempt function income, over
Allowed deductions directly connected with producing any gross income except exempt function income. Allowed deductions include a specific $100 deduction. The following are not allowed:
Net operating loss deduction (section 172).
Deductions under part VIII of subchapter B (special deductions for corporations).
(a) owners of condominium housing units, (b) owners of real property in the case of a residential real estate management association, or (c) owners of timeshare rights to use, or timeshare ownership interests in, real property in the case of a timeshare association. This income must come from the members as owners, not as customers, of the association's services. Assessments or fees for a common activity qualify but charges for providing services do not qualify.
Pay principal, interest, and real estate taxes on association property.
Maintain association property.
Clear snow from public areas and remove trash.
Amounts that are not includible in the organization's gross income other than under section 528 (for example, tax-exempt interest).
Payments from nonmembers.
Payments from members for special use of the organization's facilities, apart from the use generally available to all members.
Interest on amounts in a sinking fund.
Payments for work done on nonassociation property.
Members' payments for transportation.
Generally, an association must file Form 1120-H by the 15th day of the 3rd month after the end of its tax year.
If the due date falls on a Saturday, Sunday, or legal holiday, the association may file on the next business day.
The return must be signed and dated by the president, vice-president, treasurer, assistant treasurer, chief accounting officer, or any other association officer (such as tax officer) authorized to sign.
If a return is filed on behalf of an association by a receiver, trustee, or assignee, the fiduciary must sign the return, instead of the association officer. Returns and forms signed by a receiver or trustee in bankruptcy on behalf of an association must be accompanied by a copy of the order or instructions of the court authorizing signing of the return or form.
If an association officer completes Form 1120-H, the paid preparer space should remain blank. Anyone who prepares Form 1120-H but does not charge the association should not complete that section. Generally, anyone who is paid to prepare the return must sign it and fill in the “Paid Preparer Use Only” area.
The paid preparer must complete the required preparer information and:
Sign the return in the space provided for the preparer's signature.
Give a copy of the return to the taxpayer.
A paid preparer may sign original or amended returns by rubber stamp, mechanical device, or computer software program.
File the association's return at the address listed below.
|If the association's principal business, office, or agency is located in:||Use the following address:|
|Connecticut, Delaware, District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, West Virginia, Wisconsin||Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999-0012
|Alabama, Alaska, Arizona, Arkansas, California, Colorado, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, Wyoming||Department of the Treasury
Internal Revenue Service Center
Ogden, UT 84201-0012
|A foreign country or U.S. possession||Internal Revenue Service Center
P.O. Box 409101
Ogden, UT 84409
If the association wants to allow the IRS to discuss its 2015 tax return with the paid preparer who signed it, check the “Yes” box in the signature area of the return. This authorization applies only to the individual whose signature appears in the “Paid Preparer Use Only” section of the return. It does not apply to the firm, if any, shown in that section.
If the “Yes” box is checked, the association is authorizing the IRS to call the paid preparer to answer any questions that may arise during the processing of its return. The association is also authorizing the paid preparer to:
Give the IRS any information that is missing from the return,
Call the IRS for information about the processing of the return or the status of any related refund or payment(s), and
Respond to certain IRS notices about math errors, offsets, and return preparation.
The association is not authorizing the paid preparer to receive any refund check, bind the association to anything (including any additional tax liability), or otherwise represent the association before the IRS.
The authorization will automatically end no later than the due date (excluding extensions) for filing the association's 2016 tax return. If the association wants to expand the paid preparer's authorization, see Pub. 947, Practice Before the IRS and Power of Attorney.
See the Instructions for Form 1120 and Pub. 542, Corporations, for a list of other forms and statements the association may be required to file.
Attach Form 4136, Credit for Federal Tax Paid on Fuels, to Form 1120-H. Attach schedules in alphabetical order and additional forms in numerical order after Form 4136.
Complete every applicable entry space on Form 1120-H. Do not write “See Attached” instead of completing the entry spaces. If more space is needed on the forms or schedules, attach separate sheets using the same size and format as the printed forms. If there are supporting statements and attachments, arrange them in the same order as the schedules or forms they support and attach them last. Show the totals on the printed forms. Enter the association's name and EIN on each supporting statement or attachment.
Figure taxable income using the method of accounting regularly used in keeping the association's books and records. In all cases, the method used must clearly show taxable income. Permissible methods include cash, accrual, or any other method authorized by the Internal Revenue Code.
Generally, an association must get the consent of the IRS before changing its tax year by filing Form 1128, Application To Adopt, Change, or Retain a Tax Year. However, under certain conditions, an association can change its tax year without getting the consent.
For more information on change of tax year, see the Instructions for Form 1128 and Pub. 538.
The association can round off cents to whole dollars on its return and schedules. If the association does round to whole dollars, it must round all amounts. To round, drop amounts under 50 cents and increase amounts from 50 to 99 cents to the next dollar (for example, $1.39 becomes $1 and $2.50 becomes $3).
If two or more amounts must be added to figure the amount to enter on a line, include cents when adding the amounts and round off only the total.
The association must pay any tax due in full no later than the 15th day of the 3rd month after the end of the tax year. Do not include the payment with the tax return. However, see the instructions for Line 24. Amount owed, later.
The estimated tax and alternative minimum tax requirements do not apply to homeowners associations electing to file Form 1120-H. However, a homeowners association that does not elect to file Form 1120-H may be required to make payments of estimated tax. Because the election is not made until the return is filed, Form 1120-H provides lines for estimated tax payments and the crediting of overpayments against tax if estimated tax payments or overpayments apply.
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