Instructions for Filling Out Form 1120-H

This document offers a comprehensive guide by the Internal Revenue Service (IRS) for homeowners associations to accurately complete Form 1120-H for the 2023 tax year. It covers each section of the form, general information, and the form's purpose.

In this article, we'll provide information on Form 1120-H and a step-by-step guide on how to fill it out.

What is Form 1120-H?

Form 1120-H is a U.S. Income Tax Return for Homeowners Associations, used by these associations to take advantage of certain tax benefits and exclude exempt function income from their gross income. The purpose of this form is to allow homeowners associations to file their income tax returns while benefiting from specific tax provisions. Taxable income for associations filing Form 1120-H is taxed at a flat rate of 30% for condominium management associations and residential real estate associations, and 32% for timeshare associations. The form must be filed by the 15th day of the 4th month after the end of the association's tax year, and any tax due must be paid in full by the filing deadline.

Who Must File Form 1120-H?

Homeowners associations need to file Form 1120-H to take advantage of certain tax benefits, allowing them to exclude exempt function income from their gross income. The election to file this form is made separately for each tax year and must generally be made by the due date, including extensions, of the income tax return.

Form 1120-H Tax Filing Deadlines and Due Dates

• Form 1120-H must be filed by the 15th day of the 4th month after the end of the association's tax year.
• Any tax due must be paid in full by the filing deadline.
• The election to file Form 1120-H is made separately for each tax year and must generally be made by the due date, including extensions, of the income tax return.

Form 1120-H Late Payment Penalty

If a homeowners association fails to pay the tax due on Form 1120-H by the filing deadline, interest will be charged on the late payment, even if an extension of time to file has been granted. Additionally, penalties may be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud.

Step-by-Step Instructions for Form 1120-H

The following are the step-by-step instructions for filling out Form 1120-H:

1. Enter the association's true name, address, and Employer Identification Number (EIN).
2. Indicate if the association is a final return, name change, address change, or amended return.
3. Indicate the type of homeowners association.
4. Indicate if the association meets the 60% gross income test and 90% expenditure test.
5. Enter the association's total expenditures for the tax year.
6. Enter any tax-exempt interest received or accrued.
7. Enter any interest income.
8. Enter any other deductions.
9. Calculate the total tax by multiplying the taxable income by 30% (or 32% for timeshare associations).
10. Enter any tax credits.
11. Enter any estimated tax payments made for the current tax year.
12. Enter any credit from Form 2439 for the corporation’s share of the tax paid by a RIC or a REIT on undistributed long-term capital gains.
13. Enter the total net elective payment amount from Form 3800.
14. Add the amounts on lines 23a through 23f and enter the total on line 23g.
15. If the association can’t pay the full amount of tax owed, apply for an installment agreement online.
16. If the association had income tax withheld from any payments it received, include the amount withheld in the total for line 23g.
17. If the association must recapture any low-income housing credit, qualified electric vehicle credit, or new markets credit, include the amount of the recapture in the total for line 22.
18. Attach any necessary forms and schedules, and sign and date the form.

How to Submit Form 1120-H

To submit Form 1120-H, homeowners associations must first complete the form by following the detailed instructions provided by the Internal Revenue Service. Once the form is filled out, it must be filed by the 15th day of the 4th month after the end of the association's tax year. Any tax due must be paid in full by the filing deadline. Associations should also be aware of any tax law changes that may affect their filing and ensure they have the necessary consent from the IRS for any changes in accounting methods or tax years.

Need Help with other Finance or Startup Questions?

Choose Pilot for expert bookkeeping, CFO, and tax services, catering to numerous startups and expanding businesses. With over 10 million transactions handled and exceptional proficiency in promoting business growth, we are the premier accounting firm for startups in the U.S. Our goal is to help you thrive. Reach out to our sales team or check out our demo for more information!

‍