Let’s talk taxes! Specifically, Community Association Taxes.
The answer is, YES!
There is much speculation and uncertainty regarding community associations and submitting inApril. These associations have been thought to be “non-profits” and“tax-exempt”. However, both homeowners’ associations and condo associations must file taxes.
Communities have two options when filing their taxes. They can fill out the 1102-H or the 1120. Depending on the specifications your individual community meets, some associations will not pay taxes. This being because they do not profit. Meaning, all the money received by the association is put back into the community itself. When this is done, these associations qualify under Section 528. Within this section there are three different criteria that associations will need to meet to ensure they won’t be paying any taxes.
Qualifying - Section 528:
a. At least 60% of the associations gross income for the year must contain exempt income. (i.e. Membership Dues, Assessments, Late Fees)
a. 90% of all expenditures over the course of the year must go to maintaining the functionality of the community.
a. No shareholder or person can profit from the association’s earnings from an excess of membership assessments. (i.e Caring for the association, managing the property, building)
There are numerous factors that go into filing taxes for association. To be the most prepared when tax season arrives, it's beneficial to have a software system that can provide all your accounting information accurately, and in an organized fashion.
Caliber Software Assisting in the Tax Process!
Caliber is an all-in-one accounting and maintenance software. This system was created specifically for COAs and HOAs. While Caliber does not offer “tax preparation services”, they do offer many features that will help your association when starting the process.
- Caliber produces reports than can help the filing process
o Reports with attachments
o 1099 Vendor Reports
- Caliber can also categorize your expenses this will help when looking at association revenue and non-association revenue. These values are posted within Calibers “Income Account”.
It’s recommended that your association seek the help of a professional CPA when beginning to file. If you'd like to see an example, check out this article! Get ahead of the tax season stress by organizing your association with the most comprehensive system on the market.
Curious if Caliber could help your community? Schedule a demo today!