Annual Tax Return Follow

Annual Tax Return

The Association as a Legal Entity

When an HOA or condominium association is formed, it is typically incorporated as a non-profit corporation under state law. This makes the association a separate legal entity from the individual homeowners. This corporate status gives the association the legal authority to enter into contracts, own property, sue, and be sued. Because it is a corporation (even a non-profit one), it is required to file tax returns and is subject to corporate tax laws.

Why does a Community association need to file an Annual Tax Return?

It is a common misconception that since HOAs and condominium associations are non-profit entities, they don't have to file taxes. In fact, most are legally considered corporations, and as such, they must fulfill their tax obligations. Filing an annual tax return is a legal requirement that demonstrates the association's financial health, ensures transparency for members, and helps avoid significant penalties and fines from the IRS and state tax authorities.

Types of Tax Filings for Community Associations

A community association needs to file several types of tax returns, and deadlines are a critical part of the process.

• Federal Tax Return: The main filing with the Internal Revenue Service (IRS). 

  • Deadline - The due date is the 15th day of the fourth month after the end of the association's fiscal year. For most community associations with a calendar year (ending December 31), the deadline is April 15th.

  • Extension - A community association can get a six-month extension to file by completing an IRS extension form. However, this only extends the time to file, not the time to pay any taxes that are due. Extensions are only filed by your CPA.

• State Tax Return: A separate filing is required for the state where the community association is located.

  • Deadline: Deadlines and forms vary by state. The association's CPA must always check the specific rules.

• Other Filings: Depending on the community association activities, it may also need to file payroll taxes for employees, issue 1099s to contractors, and file an annual report with the state to maintain its corporate status.

Who Performs This Service?

Due to the complexities of corporate tax law and the specific rules governing community associations, it is highly recommended that a Certified Public Accountant (CPA) who specializes in community associations perform this service.

NOTE: Some communities work with an external CPA, but the CAM Collective provides annual tax return services to the communities we manage through our Association Tax Advisors. This is an optional service provided by the CAM Collective, and you must "opt-in" for it through the action item. 

IMPORTANT: Management Team Responsibility

A community management company plays a critical supporting role in the tax filing process. While the management team typically does not prepare and file the tax returns itself, its responsibilities include:

• Record-Keeping - Maintaining accurate and detailed financial records throughout the year, including all income and expenses.

• Document Preparation - Providing the CPA with all necessary financial documents, such as income statements, balance sheets, and bank records. This is accomplished by contacting the W360 accounting department to allow direct access for the accountant by adding them as a Service Provider in Vantaca.

• Coordination - Acting as the liaison between the association's board of directors and the CPA, ensuring timely communication and the delivery of all required information.

• Oversight - Ensuring that the tax returns are prepared and filed by a qualified professional on time to avoid penalties.

W360 Tax Filing Process

All Associations will receive an annual action item in Vantaca that will take the Manager/Association from choosing the appropriate CPA to filing/paying any appropriate tax payments. The status and/or information for all Tax Info may be found in the CAM Tax Mastersheet. Please see any overview of the steps below:

• Choose Accounting Firm - CAM team should choose indicate the preferred tax filing provider. CAM's can reference the vendor utilized the previous year in the CAM Tax Mastersheet. Once confirmed, the CAM can select between the following options:

  • Association Tax Advisors - TCC offers in-house tax preparation overseen by Certified Public Accountants. The Association Tax Advisor team handle all tax prep and electronic filing of federal taxes.

  • Outside Accounting Firm - If an 3rd party accounting firm is selected, please note the that CAM is responsible for procuring and coordinating the approval and signing of any 3rd party tax preparation contract. Once officially approved, please step to 3rd Party File. The Accounting team will then provide access to all association's financials to the approved accountant. All associations will receive a $125 charge per service provide as a Vantaca user for access to the Association's financial information.

  • Self-File: The Board of Directors has elected to file themselves. Please choose "Self-File" and once you have confirmed that the Board has completed the necessary forms.

• Tax Payments: Should the Association owe either Federal or State tax, the W360 Accounting - Tax Department submit the invoices in StrongRoom for approval. Once approved, the payment will be processed through EFTPS (Federal) or via mail by state or the preferred state payment method. 
  
  IMPORTANT: A PIN is required for any federal payment via EFTPS. Please provide either PIN's or the request for a PIN to the Accounting - Tax Department. PIN's requested may take 5-10 business days so please ensure timely response/payment.

• Estimated Tax Payments - Should the Association require estimated tax payments in the current year, the Accounting - Tax Team will log and coordinate timely quarterly payments. A log of all such associations requiring payment will be kept in the CAM Tax Mastersheet under "Estimated Payments."

• Federal/State Filing & Board Signature - Depending on the Board's preference, the CAM team will either need to e-File, have the Board of Directors review and sign, or sign on the Board's behalf with explicit approval. The CAM team is responsible for mailing or ensuring any/all tax information is mailed to the proper location.