JoanneA (Florida)
Posts: 19
Posts: 19
Posted:
If our HOA starts charging for estoppel letters--what is a good price to charge? Also, do we have to submit a form to the IRS if we do?
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Estoppel letter charge
Started by JoanneA • 3 replies • 3013 views
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SteveM9 (Massachusetts)
Posts: 3,699
Posts: 3,699
Posted:
Self managed HOA? $20-$150
Submit a form to IRS? No.
File your HOA annual tax return every year? Yes.
Submit a form to IRS? No.
File your HOA annual tax return every year? Yes.
TimB4 (Tennessee)
Posts: 21,047
Posts: 21,047
Posted:
Money received for those letters would be considered income for the Association and claimed as such on the Association Taxes.
I would suggest charging no more that the cost of providing them (rounded up to the nearest dollar). This way, if the amount is ever challenged as being excessive, the Association is covered.
I would suggest charging no more that the cost of providing them (rounded up to the nearest dollar). This way, if the amount is ever challenged as being excessive, the Association is covered.
BruceF1 (Connecticut)
Posts: 2,535
Posts: 2,535
Posted:
Quote:
Posted By JoanneA on 12/22/2011 6:23 AM
If our HOA starts charging for estoppel letters--what is a good price to charge? Also, do we have to submit a form to the IRS if we do?
If our HOA starts charging for estoppel letters--what is a good price to charge? Also, do we have to submit a form to the IRS if we do?
To clarify the tax issue:
1. Income derived from assessments paid by everybody is considered exempt function income and is not taxable.
2. Income derived from other sources such as interest on deposits, fees for special services (such as fees for estoppel letters), clubhouse rental fees, etc., is considered non-exempt function income and is taxable after a $100 standard deduction. You may also deduct the costs associated with producing the non-exempt function income.
3. The income ratio must be 60% or greater exempt function income and 40% or less non-exempt function income. If you fail to meet that test, you cannot file as an HOA using 1120-H and must file as a standard corporation using Form 1120. In that case, ALL income is taxable after deductions.
4. You must also meet the 90/10 expenditure test in order to file as an HOA using 1120-H. That is, 90% of your income from all sources must be related to maintaining your real estate (including related operating expenses, such as insurance, etc.). No more than 10% can be spent on unrelated activities.
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