Here is a brief summary of the tax reporting and filing requirements for your association. For further information, contact your association’s CPA or accounting professional.
HOA Tax Return Deadlines
Employment Tax Returns
Standard Deadline: 30 Days After End of Each Calendar Quarter
For those associations that hire employees, Federal form 941 and California form De-6 are due 30 days after the end of each calendar quarter. Tax payments are due semi-weekly, monthly or at the filing date, depending upon the amount owed. Annual tax reports (Federal W2, 940; California DE-7) are due January 31.
Federal Income Tax Returns
Standard Deadline: March 15
All associations, no matter how small, must file a Federal income tax return two and a half months after the end of its fiscal year. For calendar year associations, the due date is March 15, although it can be extended for 6 months by filing an extension form (IRS Form 7004). HOAs may elect to file Form 1120H or the standard corporate form 1120.
California Income Tax Returns
Standard Deadline: March 15
California Form 100 is also due the same time as the Federal returns. While most associations have “tax-exempt” status with the State of California, nonmembership income such as interest is taxable. If the association has more than $100 in nonmembership income, then a return is required. Failure to file Form 100 when required can result in significant penalties and interest if tax is owed and can also result in the suspension of the corporation by the state.
California Exempt Organization Return
Standard Deadline: 4.5 Months After Year-End
Form 199 is required of all tax-exempt associations that receive $25,000 or more in revenue from any source (assessments, etc.) It's due four and a half months after year-end but that date can also be extended. A $10 filing fee is required annually. Failure to file this form when required can result in an additional $55 in penalties plus interest. Corporate powers can also be suspended for failure to file this form.
Estimated Tax Payments
Standard Deadline: Quarterly
If an association pays income taxes on its nonmember income, then it may be required to pay estimated taxes quarterly to avoid an estimated tax penalty. For Federal, estimates are required if taxes are $500 or more. The state has no minimum. With increasing interest rates, many associations will be paying more this year in income taxes than in the last 2 or 3 years. Federal tax deposits are made to your bank using a Federal Tax Deposit coupon, while state taxes are paid by check and mailed using form 100-ES. Payments for calendar year associations are due April 15, June 15, September 15 and December 15.
1099 Tax Forms
Standard Deadline: December 31
Associations, like all other businesses, are required to file 1099 forms by January 31 for payments made during the previous calendar year. This is true even if the association has a fiscal year end other than December 31. If you pay $600 or more during the calendar year to a "noncorporate service provider,” then you are required to issue a 1099-MISC to that service provider. Common HOA service providers include:
- Pool service
Corporate service providers are exempted from receiving 1099s. But how do you tell which providers are corporate? If the business has the words “inc.” or “corp.” in its name, then it is a corporation. The word “co” (for company) does not specify a corporation. The 1099 form must show the service provider’s name, address, and tax identification number (either social security or employer ID number) along with the amount paid during the calendar year. Copies should have been submitted to all service providers by January 31 and are due to the IRS by February 28 (the delay is to allow for corrections that may arise).
Independent Contractor Reporting
Standard Deadline: Within 20 Days of Specified Payments or Execution of Specified Contracts
Six years ago, California law was changed to require businesses that use individual independent contractors to report “within 20 days of the earlier of first making payments that in the aggregate equal or exceed $600 in any year to a service-provider, or entering into a contract or contracts with a service provider providing for payments that in the aggregate equal or exceed $600 in any year” to the California Employment Development Department (EDD).
This law is intended to locate “deadbeat” parents who are receiving payments other than wages to be able to garnish them quickly to meet child support obligations. You use many of your contractors on a continuous basis, so January is a good time to report them to the EDD. Reporting is done on form DE-542 and can be mailed or faxed to the EDD.
The most troublesome things about this law (and yes, there are penalties for failure to file) is that reporting can be required at any time during the year, not just once a year or quarterly. For example, say you hire a painter on May 15 and sign a contract for a $5,000 job. Reporting would be required by June 4, even if no payments had yet been made. The reporting deadline is always 20 days after signing the contract.
Secretary of State Biennial Filings
Standard Deadline: Every Two Years
The Nonprofit Corporation Statement of Information (SI-100) and the Statement of Common Interest Development (SI-CID) are required to be filed with the Secretary of State every two years. These are not tax forms, but failure to file them with the Secretary of State can result in the suspension of corporate status. Filing fees are $20 for the SI-100 and $15 for the SI-CID. Since the forms are required only every two years, the due date is tied to the association’s incorporation month, not its fiscal year; and since they are not tax forms, it is common for this filing to be overlooked if the association’s mailing address has changed. Although it is seldom done, the state also allows for updated forms to be filed without the payment of an additional filing fee. Fill-in forms are available on line at www.ss.ca.gov.
By Michael Gartzke, CPA. Image courtesy of Goldy and FreeDigitalPhotos.net