Is Your Homeowners Association Filing Required Tax Returns?

Homeowners association directors are responsible for the proper management of their homeowners association irrespective of whether the association has retained a professional property manager to assist in the management of the association. The management responsibilities of an association’s directors includes the filing of required tax returns with state and federal taxing authorities. Notwithstanding this responsibility, unknowing volunteer directors are often under the mistaken belief that, because their homeowners association is a nonprofit corporation, it is exempt from the responsibility for paying taxes and filing tax returns.

It is important for homeowners association directors and management personnel to know that, even if their homeowners association has been organized as a nonprofit corporation, it is still required to file federal income tax returns each year with the Internal Revenue Service and state tax returns that are required by state taxing authorities. The federal tax returns are required to be filed within the 2 ½ months following the end of the association’s fiscal year. This obligation is set forth in Internal Revenue Code §528. The failure to file required tax returns can result in the assessment of penalties in addition to the obligation to file all prior returns that were not filed, and pay the required back taxes and interest on the required amounts.

The federal tax returns that are typically filed by a homeowners association are: This content is for Subscribers. To continue reading, you must have a Subscription with HOA Member Services.