Common Mistakes on Condo and HOA Tax Returns

Common Mistakes on Condo and HOA Tax Returns

Condo and HOA Tax Returns are complicated

Associations have a choice of two returns to file

Form 1120-H is a very simple, one-page form

Many associations overpay their taxes because they don’t know what items are taxable versus those that are not taxable, or they don’t know what deductions are allowable against interest income or other taxable income.

Common Mistakes:

  • No deductions are taken against interest income
  • No deductions are taken against “other taxable income”
  • The deductions taken are too low
  • Income categories that should not be taxed are included in taxable income
  • Taxable income that could be eliminated with proper tax planning are being taxed

In addition:

  • Taking inapproriate deductions
  • Failure to include income sources that should be taxable
  • File Form 1120-H when they clearly do not qualify to do so

Common Mistakes on Form 1120:

  • No election is taken under Revenue Ruling 70-604
  • Separate bank accounts are not maintained for the “capital” Reserve Fund
  • Improper deductions are taken for reserve expenditures
  • Failure to include in income the prior-year carryover under Revenue Ruling 70-604
  • Failure to segregrate member and non-member income and deductions
  • Failure to segregate operating and capital/Reserve activities
  • Failure to follow proper procedures in making Revenue Ruling 70-604 election
  • Failure to follow proper procedures of IRC Section 118 for “Contributions to Capital” (reserve assessments)
  • Failure to provide reconciliation of carryovers under Revenue Ruling 70-604 of RIC Section 277
  • Taking inappropriate deductions
  • Failure to include income sources that should be taxable

That’s where we come in. We have the knowledge and experience to do the job right.

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