The IRS classified homeowners associations as corporations. For this reason, HOAs must file tax returns at the end of their financial year unless they have a tax exemption status. However, filing tax returns can be complex and overwhelming, even for small HOA communities. Many associations owe the IRS unpaid taxes because of unfiled HOA tax returns. Some don’t realize they have a tax liability until too late. This guide explains what to do if you have delinquent HOA tax returns.
Locate the Last HOA Tax Return Files
The first step to dealing with unfiled HOA tax returns is determining when you last filed your taxes. You can check your inbox for any correspondence you had with the IRS. The IRS usually sends reminders or notifications to HOAs and taxpayers to file their tax returns.
Compile the Appropriate Financial Statements
Once you have sufficient information on your delinquent HOA tax returns, gather all the appropriate financial records you need to calculate your dues. You might need the help of a certified public account or tax expert to review and prepare your tax documents.
Contact the Internal Revenue Service
The next step involves contacting the IRS. The IRS has an open-door policy and is more than ready to discuss the situation and address your concerns. They will inform you of any penalties and interest you must pay when filing late tax returns.
Select the Appropriate Tax Forms
When you contact the IRS, they will also inform you whether your HOA qualifies for Form 1120-H or 1120, depending on your tax liability. A CPA can also help you select the appropriate tax form to utilize when filing unfiled HOA tax returns.
Understand Unfiled HOA Tax Returns Consequences
Delinquent HOA tax returns often attract hefty fines and penalties. The IRS penalizes HOAs 5% of any unpaid tax balances each month the tax return remains delinquent. However, the penalty remains capped at 25%. Returns over 60 days late pay a minimum penalty of $205 or an amount smaller than the tax due. Unpaid taxes attract a ½ of 1% of the due amount for each month they remain unpaid.
File Delinquent HOA Tax Returns
Once you have all the necessary information, you can clean up the mess by filing the late tax returns and paying the required penalties. A CPA can help you navigate this process to ensure you submit the correct returns.
Enlist Professional HOA Tax Return Services
Delinquent HOA tax returns can lead to fines plus interest. Fortunately, you can make things right by meeting your tax obligations. A professional HOA accountant can help you calculate your due taxes and file the appropriate returns to ensure compliance. Contact Abel Accountants for specialized HOA tax return services in Sandy Springs and the surrounding communities.
