Can our HOA treasurer prepare and file Form 1120-H without a CPA?

By OurHOA · General information · Revised October 27, 2026

How a volunteer HOA treasurer prepares Form 1120-H: the 60 and 90 percent tests, taxable interest, the $100 deduction, signing, paying, and state returns.

Part of the HOA board handbook: treasurer and money.

The short answer

Often, yes. If the association's only income outside of dues and assessments is interest on its bank accounts and maybe a few clubhouse rentals, Form 1120-H is a one-page return that a careful treasurer can finish in an evening once the books are closed. The IRS instructions allow for it: if an association officer completes the return, the paid preparer section stays blank. Hire a CPA instead when the association sold property, has employees, owns depreciable assets used to earn outside income, has years of unfiled returns, or is weighing Form 1120 against Form 1120-H because of a large surplus. The figures below come from the IRS instructions for the 2025 Form 1120-H, the latest published. Check the current year's instructions before you file, and treat this as general education, not tax or legal advice.

Before you start: sort every dollar of income

The return turns on one split. Exempt function income is membership dues, fees and assessments paid by owners as owners, for a common activity. It never appears on the income lines. Everything else does. The IRS lists what falls outside the exemption: payments from nonmembers, payments from members for special use of a facility beyond what every member gets, interest on amounts in a sinking fund, payments for work on property the association does not own, and tax-exempt interest, which goes in item E instead. In practice, pull last year's income accounts and tag each one. Regular dues and special assessments: exempt. Interest on the operating, reserve and CD accounts: taxable. A member renting the clubhouse for a private party: taxable, because that is special use. A cell tower lease or a nonmember paying for pool passes: taxable. Write the tags on the trial balance and keep that page with the return. It is your support if the IRS ever asks.

The two tests at the top of the form

Items B and C decide whether the association can use Form 1120-H at all. Item B is total exempt function income, and it must be at least 60 percent of gross income. Item C is spending to acquire, build, manage, maintain and care for association property, and it must be at least 90 percent of total spending, which goes in item D. Use the same accounting method the books use, cash or accrual. Item C counts the manager's or secretary's pay, landscaping, paving, street signs, security guards, property taxes on common property, pool and clubhouse costs, and replacements of common building parts, both operating and capital. It does not count money moved into reserves. The instructions say this directly: a transfer to a sinking fund to replace a roof is not a qualifying expense, even though the roof is association property. Count the roof when the roofer is paid, not when the transfer is made. Most dues-funded HOAs pass both tests by a wide margin. If yours is close, stop and call a CPA before filing.

Working down the page with a sample HOA

Take an 80-home association with $240,000 in dues, $6,200 of interest on its reserve CDs, and $1,500 from a church group that rents the clubhouse on Sundays. Item B: $240,000. Gross income for the test is $247,700, so dues are 96.9 percent. The test is met. Line 2, taxable interest: $6,200. Report it gross. Do not subtract interest the association paid on a loan. Line 3, gross rents: $1,500. Line 8, gross income excluding exempt function income: $7,700. Lines 9 to 15 take only expenses directly connected to earning that $7,700, such as cleaning paid for after each rental. Ordinary operating costs paid with dues do not belong here. When a facility or a person serves both members and outside renters, Regulations section 1.528-10 sets how to split the cost, and that is a good point to ask a CPA rather than guess. Say the board allocated $300 of cleaning to the rentals, so line 16 is $300. Line 17: $7,400. Line 18 is the specific deduction of $100, already printed on the form. Line 19, taxable income: $7,300. Line 20: 30 percent of line 19, or $2,190. Timeshare associations use 32 percent. A small loss does not carry forward, because the net operating loss deduction is not allowed on this form. If line 19 is zero or less, enter zero. The association owes $2,190. Note that the dues surplus is not taxed at all on this form, which is the reason most associations elect it.

Signing, filing and paying

An officer signs: the president, vice president, treasurer, assistant treasurer or another officer authorized to sign. Put the authority in the minutes. A motion the board can copy: "I move that the board authorize the treasurer to prepare the association's federal income tax return for the year ending December 31, sign it as an officer, and pay any tax due from the operating account, and that the treasurer give the board a copy of the filed return at the next meeting." Enter the association's legal name exactly as it appears in the articles of incorporation, and its EIN. Mailing address: associations in Texas, Florida, Colorado and the other states in the second group of the instructions file paper returns with the Internal Revenue Service Center, Ogden, UT 84201-0012. E-filing is available, and it is required when the association files 10 or more returns of any type in the calendar year. Forms 1099-NEC count toward that ten, so an HOA that sent nine 1099s plus this return is at ten. Payment must be electronic. Enroll the association in EFTPS, the Treasury's free payment system, long before April, not the week the tax is due. Do not mail a check with the return.

Deadlines and what happens if you miss one

Form 1120-H is due on the 15th day of the fourth month after the tax year ends: April 15 for a calendar-year association. A fiscal year ending June 30 is the exception, due the 15th day of the third month. Form 7004 gives an automatic six-month extension to file, but not to pay. Estimate the tax and pay it by the original due date. File the 7004 under the form type the IRS already has on record for the association, even if that was Form 1120. A late return costs more than a penalty. The instructions say an association that misses the due date, including extensions, can lose the right to elect Form 1120-H for that year. Regulations section 301.9100-2 gives an automatic 12-month extension to make the election if the association takes corrective action within 12 months of the due date, so a return found missing in August can usually still go in as a 1120-H. The late filing penalty is 5 percent of unpaid tax per month, up to 25 percent. For returns due in 2026, a return more than 60 days late carries a minimum penalty of $525 or the full tax, whichever is less. Late payment adds half a percent a month, plus interest. Our guide on responding to an IRS notice sent to an HOA covers the letters that follow a missed return. A calendar that works: January 31, 1099s out. By February 28, books closed and reconciled. Mid-March, return drafted, with a second board member checking the income tags and the math. By April 1, return filed and tax paid through EFTPS.

State returns: Texas and Florida

Texas has no corporate income tax, but it does have a franchise tax. Tax Code section 171.082 exempts a nonprofit corporation organized and operated mainly to manage and maintain a residential condominium or real estate development, where lot or unit owners control at least 51 percent of the vote and that control is not held by one person, one family or the developer. The Comptroller says a qualifying HOA must apply for the exemption on Form AP-206; it is not automatic. If no one can find the approval letter, check the association's franchise tax account status with the Comptroller and apply if needed. The exemption covers franchise tax only. Florida's Department of Revenue says an HOA that files federal Form 1120-H does not file a Florida corporate income tax return. An association that files federal Form 1120, by requirement or by choice, must file Florida Form F-1120 whether or not it owes tax, citing section 220.22 and rule 12C-1.022(1)(c). Switching federal forms therefore changes the Florida filing too. Other states, Colorado included, set their own rules for associations, so check your state revenue department's corporate return instructions or ask a CPA once.

Mistakes treasurers make on their own

Putting dues on line 7. Other income excludes exempt function income. Dues belong only in item B. Counting reserve transfers as qualifying spending in item C. Count reserve money when it is spent on association property. Netting interest. Report interest earned on line 2 in full, even if the association also paid loan interest. Skipping the return because no tax is due. The association still files. The election is made by filing, and a missing return can lose it. Mailing a check. Tax payments must be electronic. Keeping no file. Save the signed return, the tagged trial balance, the interest statements and the EFTPS confirmation in the association's records, and add them to the handoff for the next treasurer. When the year has outside complications, our guide on getting HOA books ready for the CPA covers the package to send instead.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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