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Good Morning, Our unincorporated condo association has not

Good Morning, Our unincorporated condo association...
Good Morning,

Our unincorporated condo association has not filed either federal or state taxes since 2009 (2009, 2010, 2011, and 2012). We are a very small organization (only three units). All of our revenue is used to fund maintenance and reserves. We do not earn any interest in our accounts and therefore have no gross income.

We would like to assure that we have met our filing requirements for past tax years. My understanding is that we can file 1120-H forms for the missed years. I believe Massachusetts does not require a filing if gross income is less that $100.

I would like confirmation that my assumptions below are correct. If not, then the proper way to resolve. Additionally if I am to back file, is there any specific protocol to follow. Would I just send in the completed forms or would I send in accompanied by a letter.

Thank you.
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Answered in 22 minutes by:
6/2/2013
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,689
Experience: Taxes, Immigration, Labor Relations
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LEV :

Hi and welcome to Just Answer!


All Homeowners and Condominium associations whether incorporated or not must file an annual Federal income tax return which are due March 15th.
As Condominium association - you may choose to file Form 1120H as its income tax return to take advantage of certain tax benefits. These benefits, in effect, allow the association to exclude exempt function income from the gross income. A Condominium association elects to take advantage of the tax benefits provided by section 528 by filing a
properly completed Form 1120H. The election is made separately for each tax year and generally must be made by the due date, including extensions, of the income tax return.
If the association does not elect to use Form 1120H, it must file the applicable income tax return, for example, Form 1120, US Corporation Income Tax Return.
If the homeowners association fails to make the regulatory election to be treated as a homeowners association, it can get an automatic 12-month extension to make the section 528 election, provided corrective action is taken within 12 months of the due date (including extension) of the return.
Thus - you may still file 2012 tax return using form 1120H, but for previous years - you should use form 1120.

LEV :

In addition, a Condominium association that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $135.

LEV :

The penalty will not be imposed if the association can show that the failure to pay on time was due to reasonable cause. In this case - you need to attach a letter with explanation.

Customer:

Thank You Lev!

Customer:

Would you suggest that we file form 1120-H for 2012 and see if they come back requesting the past years. I suspect the reasont hey have not picked up on us is a direct result of us having $0 income.

LEV :

If you simply file form 1120H for 2012 and file it late without any explanation - the most likely outcome will be that the IRS will reject your filing and will request to file a form 1120 instead.
The reason you did not receive any notice - most likely because the IRS doesn't have any income reported on your account.

Ask Your Own Tax Question
Just in case you were not able to use the chat - I am switching to Q&A mode and porting the answer below.
Please feel free to communicate if you need any clarification or have other tax related issues.

If you simply file form 1120H for 2012 and file it late without any explanation - the most likely outcome will be that the IRS will reject your filing and will request to file a form 1120 instead.
The reason you did not receive any notice - most likely because the IRS doesn't have any income reported on your account.
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Customer reply replied 4 years ago


We would like to avoid filing form 1120 if possible. In your professional opinon should we file 1120-H accompanied by a letter?

As you are filing late - you may not use form 1120H.
You definitely may try providing a letter with reasonable cause.
But honestly - your chances are minimal.
I would try if you have a solid cause - such as health or casualty. If you simply forgot - most likely your request would not be accepted.
Lev
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Category: Tax
Satisfied Customers: 30,689
Experience: Taxes, Immigration, Labor Relations
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