Notwithstanding, that homeowner associations are nonprofit and generally not subject to income taxes, they must file income tax returns both with the Franchise Tax Board (FTB) and the Internal Revenue Service (IRS) and, if required, pay income taxes. Both state and federal tax returns must be filed within 2 months after the end of the association's fiscal year.

Incorporated community associations must pay a minimum annual corporation tax of $800 unless it receives an exemption by filing FTB Form 3500. If granted, HOAs are still required to annually file Form 199 and pay income taxes on net nonmember income.

Boards are not relieved of their duty to file tax returns even if prior boards failed to do so. Failure to file returns can result in substantial penalties, back taxes and interest. It is important to make certain that the tax preparer is instructed to file 1099's on behalf of the associations unless they are filed by the management company.

Engagement Agreement - HOA Tax Returns

Agreement for Services - Suspended HOA