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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29967
Experience:  Taxes, Immigration, Labor Relations
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Can a commercial condominium file an 1120-H form? We have

Customer Question

Can a commercial condominium file an 1120-H form? We have done so for the past 32 years and have
been told by our new accountant that this is incorrect and we must file an 1120. If this is correct how do we change this designation without consequences.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
In order for an organization to be considered a condominium management association or a residential real estate management association (and therefore in order for it to be considered a homeowners association), substantially all of its units, lots or buildings must be used by individuals for residences.See instructions for form 1120Hhttps://www.irs.gov/pub/irs-pdf/i1120h.pdfA homeowners association files Form 1120-H as its income tax return to take advantage of certain tax benefits.Definitions Homeowners association. There are three types of homeowners associations.1. A condominium management association organized and operated to acquire, build, manage, maintain, and care for the property in a condominium project substantially all of whose units are homes for individuals.2. A residential real estate management association organized and operated to acquire, build, manage, maintain, and care for a subdivision, development, or similar area substantially all of whose lots or buildings are homes for individuals.3. A timeshare association (other than a condominium management association) organized and operated to acquire, build, manage, maintain, and care for the property that has members who hold a timeshare right to use, or a timeshare ownership interest in, real property of the timeshare association. A timeshare association cannot be a condominium management association..So your new accountant is correct - you may not use form 1120H.
Customer: replied 1 year ago.
If the commercial condominium (warehouse condominium) may not use the 1120H then what form should they use? What is the procedure for filing with the new form after so many years of doing it incorrectly?Where is the written confirmation from the IRS on this issue similar to your information above? Thank you. BN
Expert:  Lev replied 1 year ago.
The written confirmation from the IRS is in instructions that I referenced above -see instructions for form 1120H - https://www.irs.gov/pub/irs-pdf/i1120h.pdfwhich provides types of organizations may use form 1120S..Which specific tax return your organization should use - depends on tax classification.Most likely - it is classified as C-corporation and must use form 1120.As the association filed incorrect form - legally speaking - tax returns are considered as not filed - and the IRS may assess tax liability for all these years. So - the correction procedure would be just to file all these tax returns with attached explanation note.Because of possible late filing penalties - I suggest to retain a local CPA helping you on the issue, and start filing correct form for the last tax year.Sorry for your situation.