Las Vegas HOA Topics: Do HOA’s have to file a tax return?

Do Las Vegas HOA’s have to file tax returns?  In short, yes, of course they do. They are non-profit corporations. Homeowner associations can be rather complex on many levels and filing taxes is one of those complexities even though the HOA’s only income is through their assessments and the occasional fine that is paid or small amount of interest earned on their bank account.  Due to the complex nature of HOA tax returns, it is very important that an HOA chooses a qualified, licensed accountant or CPA to perform their tax returns.  According to Internal Revenue Code (IRC) Section 7701, Community Managers or agents of the management company should not prepare tax returns unless they are licensed/registered with the IRS to do so!

HOA’s can file one of two tax return forms:  Form 1120 or Form 1120-H

1120:

  • Form 1120 is a regular tax form for a corporation and is required for commercial condominium associations.  This is the most risky and the most difficult to prepare of the two available options but comes with a lower tax rate of approximately 15% on the first $50,000.00 of taxable income.  Filing this form may subject the association to an increased risk of a tax audit and requires the allocation of income/expenses between membership and non-membership activities.

1120-H:

  • Form 1120-H is the most commonly used form and was designed specifically for homeowners associations.  It requires the allocation of income/expenses from exempt and non-exempt income activities.  Exempt income is generally assessment income and is not taxable, while other income such as interest earned on a bank account guest fees or clubhouse rentals (to name a few) are considered non-exempt income and are taxed at a rate of approximately 30%.

In summary, we recommend that HOA’s use a qualified tax preparer to complete tax returns on an annual basis, request the use of the nearly risk free Form 1120-H if your association qualifies under IRS rules and remember … taxes are due by March 15th for homeowner associations.

If you have any questions, please feel free to contact a member of the Shelter Management Group (SMG) team, we would be happy to help!  Contact us at 702-818-4780 or info @ sheltermanagementgroup.com.

Article Authored By: Jamie Collins, Supervising CAM, CMCA, AMS agent at Shelter Management Group (SMG)