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Video instructions and help with filling out and completing 1120-h due date 2020
Well hello my name is Brett Hirsch I'm an instructor for overnight accountant comm and I like you're welcome to to another one of our two-minute tax takes now in this two-minute tax take we are going to be discussing a question or answering a question rather we received from many homeowners associations and that question is does my HOA need to file an income tax return so as if you're familiar with our 2-minute tax takes I need the time myself to see if I can do this in two minutes or less so we are going to start now the answer is yes all HOAs must file an income tax return can depend on the business structure the structure of your HOA for example if you are formally approved as a nonprofit organization formally approved by the Internal Revenue Service not that you think you're a non-profit not that you file with your state is a non-profit formally approved by the IRS you would file Form 990 if not you're really considered a corporation for tax purposes by the Internal Revenue Service and you're supposed to file form 1120 sorry makes no sense you're supposed to do it unless you qualify to file form 1120 H and guess what most HOAs qualify to file form 1120 H there's a picture of it it's a relatively simple form if you're trained in how to prepare it membership dues and assessments are not taxed on form 1120 H however taxable income is taxed at 30 percent rate 32 percent if you're a timeshare can your HOA file form 1120 H yes if it passes five tests let's go over the test real quick number one is the operations test that basically means that 85 percent of the Lots and condo units in your HOA are managed by your HOA and they are intended for residential purposes neither used for residential purposes were intended for residential purposes the income test that basically means that 60% or more of your income is what we call exempt function income and that basically is dues and assessments from members for the most part expenditure test test number three 90% of the expenses of your HOA or what we call exam function expenses and that basically means they are used to maintain used to manage to maintain HOA property test number four no private adjournment that basically means your HOA cannot benefit one individual group of individuals that basically means that you're officers not taking money and using it for their own private purposes that's basically what you spun into that issue test number five final test election you need to elect to have IRS Code section 522 plan for that tax your sounds complicated it's not you do it by foul on your form 1120 H one time it's really that simple you pass all five tests guess you can file form 1120 if no you must file form 1120 I'm sorry that's