filing 1099's for vendors

We are a fairly new HOA. One of the BOD's told me we were exempt as a non profit association from filing 1099's for our vendors with the IRS. How can that be? Pa

Pamela:

Brian hit it on the head, if they are your employees then yes you need. If they are a company that is hired then no.

just curious susan, do you give YOUR doctor a 1099? or your barber/salon owner? Or your mechanic?

If you do not, why not CYA?

There are specific rules that spell out when a 1099 is required.

Having once owned a business, I've filed (given to others and reported to the IRS) 1099's before. There are a number of situations which require businesses (an HOA is a "business" under the tax code, read the attached) and, in some cases, even individuals, to report income paid to others on a 1099. A 1099 is NOT used to report the income (wages) of an EMPLOYEE. Another form is used for that purpose. A 1099 is required for anyone who is paid for a service and is required to file and pay his or her (or its) own income tax (such as a contractor, a subcontractor, a lawn maintenence contractor, snow removal contractor, etc.). This is true whether the "person" supplying the service is an individual or sometimes a corporation, and the amount paid during the taxable year exceeds $600. It's more than a CYA, it is a requirement. Failure to file a 1099 could result in a disallowance of the payment as a business expense if the return is audited by the IRS.

Yes, even payments in excess of $600 to physicians and physicians corporations are required to be reported to the IRS on a 1099, but not by INDIVIDUALS; only by businesses (such as insurance companies).

To sum it up - an HOA MUST file 1099s. It's not an option. Check the tax rules. Read the attached publication.

thanks guys! learn something new all the time here.

So, as an HOA, we should hire corporations if possible, to do work for us? Would that exempt us from filing these forms?

Oops - I forgot. I DID hire someone to do it for me - the same accountant that did my personal and business tax return.

But, it's still simple. I had to sign the 1096, of course, and from what I saw of what the tax preparer did, it was easier and faster than doing a personal 1040 with itemized deductions. I typically had 6 to 10 different contractors during the year.

In our HOA, we have an accountant do our annual tax return (1120H) and our 1099s.

Yes, yes, yes and YES.

We had only one fellow for whom we ended up having to file a 1099.

Our previous lawn maintenance guy.

Everyone else was incorporated and we paid them more than the $600.00

It was when I called to get the lawn maintenance guy's taxpayer ID number that we discovered he had been working for us under "rigged" bids, caused by a sort of cahoots thing between the former treasurer and the former Architectural Committee chairman/board member (who also happened to be in charge of securing competitive bids.)

We found out that all our payments, upwards of $18,000 on the year, were in essence TAX FREE income to the lawn guy!!

When we told him we needed to file 1099s he sent us a bill for $5,400 for that year so that he would be able to pay the income tax on our payments to him!!

We were like "pfffft YEAH! In a pig's eye!"

He said that the former board member had promised him we would never file 1099s on him.

It takes nothing to do it but a few minutes of your time, and it's better to stay on the RIGHT side of the IRS than not.

Once again, I'm placing myself in the dumb catagory...I'm not sure I understand...All are a business as far as I know (the MC/termite/lake services are listed in the phone book)....lawn service, we have a contract, as I stated I'm not sure about the maintenance man(men). We had several lawn service companies last year that caused us to go serveral thousand dollors over the lawn budget.(and I think they were all a friend of a friend-but each were paid over $600.) I'm pretty sure the one we have now has a license, he gets $1958. a month. We do have contracts on all the vendors except I can't get any information on this new maintenance man( it seems each MC we have had has there own maintenance man they use) The last one was charging the Association $20/22. an hour but we found out the man doing the work was only getting $10. an hour....another way for MC's to pad their income. I feel this is happening again because they won't send me the files I have requested.

I am already on the Boards/MC's sxxt list becuae I ask too many questions and want to many answers. I was just elected back to the Board Mar.31st. Asking questions is not on eithers agenda...

Can we get in trouble? Is there a likely hood the IRS will catch this?...sould I ask the MC about this? Our taxes were already files a few days late. They were due on the 15th of Mar. right?...sorry for all the questions but I'm not sure what to do.

Just so you know it's a standard expectation, go to conoco-phillips website page that deals with Vendor Relations:

It says:

Form 1099-MISC Information

ConocoPhillps Company and subsidiaries will issue IRS Form 1099-Misc to reportable vendors by February 1 of each yeara.

If you have questions concerning your 1099-Misc Form, or have not received a 1099-Misc form for goods or services sold to ConocoPhillips, please contact us at XXX-XXX-XXXX.

Please have the following information ready when you contact us:

Vendor Name
Vendor Number
Vendor Address
Tax Identification Number.

http://vendors.conocophillips.com/form1099/index.htm

I have a file on each vendor we use with their Tax ID number. Each one. That way, if we need to file a 1099, I already have it.

As I said, we didn't discover that we WEREN'T filing on some of our vendors until I became treasurer and there was no tax ID number on any of the files for any of our vendors. In the process of calling them to update the files, that's when we 'discovered' the tax-free income we had been providing or previous lawn maintenance contractor.

He was in the phone book, too.

Any legitimate vendors are totally aware of 1099-Misc forms and have absolutely NO problem providing you with their tax ID number. If you run into any who do, recognize that as a flag and make sure that all your ducks are in a row when dealing with him.

Just type "form 1099" into a google search and you'll find all the info you need about them.

Correction, my last post said, "....you pretty much are required to issue 1099's to all incorporated vendors ...", I meant to say "...you pretty much are required to issue 1099's to all UN-incorporated vendors....",that you have paid in excess of $600 during the year to.

Bruce...my man....I have posted many post to this forum...I have said many times that this Board & MC do not like me because exactly what I have done here...I ask questions and they won't answer me, so I ask again and again. For over a year the Board would not let me volunteer to the Board but I out smarted them this time I went after proxy's so am now the new treasurer. Once again I am a thorn in their side. From the very beginning, 2006, HO takeover I have stated over and over, lets follow the CC&R's and if the HO's don't like something, lets vote to change it. Lets not pretend it's not there. They didn't like this. They enforce some rules and ignore others, they allowed interest to be charged on some and not others, took from Reserves, not funded Reserves in over a year, filed the taxes late...you name it and it hasn't been done incorrectly. I have called asking them to explain why, asking questions, they won't answer, they don't like being ask questions and already they want me off the Board (just got on Mar31st)...This MC has already e-mail me, calling me names because I question them...She keeps replying to me that she(PM)/they(MC) are professionals and don't need my advice or interference w/their job.

I am sure they didn't file any 1099's because the resigning treasurer told me she was sure they hadn't, shes never signed anything. She said it would cost the HOA more money...duh..so we break the law.

I'm going to e-mail the bookkeeper and ask her but what if she says NO, she didn't get the vendors TIN and she didn't get the CPA to do it. What then, do I just keep my mouth shut, tell the IRS, or ask them to file a amended form?...

I feel I have the right to want the rules followed as a HO/Board member for my own sakeprotection but I don't want to do something that will harm all HO's...What if they then turn against me too..Right now the HO's minus Board are w/me but maybe not if it hits their pocket book. I feel I'm between a rock and a hard place.

Sidney:

You are the treasurer.

I am the treasurer of our HOA. We don't have a management company. However, if we did, as TREASURER, I would request a review of all our vendor files. I would check to see that all vendors have provided TINs. If they did not, I would hand the list of those we don't have over to the PM and request that she obtain them.

Or, I would just call them myself, get the TINs then put them in the files.

I would then request all the tax documents.

If there are no 1099-Misc's in there, I would notate that and ask the PM (or whomever did last year's taxes) why not.

If they were told NOT to provide them, I would make them fill them out and file them anyway.

Sidney,

If you have a MC, AND a bookkeeper AND a CPA - and they ALL say the 1099's weren't filed? Amazing . . . (P.S. you can buy a packet of them at Sam's Club and hand write them out yourself, if needed)

Also, I believe that not-for-profits have a different IRS tax form deadline, other than April 15. (May be May 15)

As treasurer, you are to oversee that things get done. Not do them by yourself. If you must, start establishing current policies if you think things are not being done correctly. Establish a Finance Committee that can meet and get answers that you seek on these internal questions. Then you can make an accurate report to the board.

I am sure every HOA has stuff buried, but don't dwell on them.

Just cover your watch and get things ready for the future.

Sidney,

Don't forget that the MC works for you, as many people have stated already. The files of paid invoices are actually yours, (your HOA's) property. Any home owner, as well as Board member, has the right to view the accounting records, it's the homeowner's money that the MC is dealing with, not their own. Your Board Members should be getting the financials on a regular basis, ie: monthly, quarterly. You as the Treasurer, can ask to meet with the MC, bookkeeper, CPA or whomever prepares your financials before they are finalized to go over them before they are printed out and issued. The accounting files are yours, you can ask to see whatever is in them. With your financials, ask for a general ledger for the year, or whatever period you want to look at. The general ledger will detail out what was paid out and to whom and for what. You could prepare your 1099's from that information. As someone else suggested, you can get the forms at an office supply store, or order them from the IRS.

As the Treasurer, it is amazing to me that you are having such trouble getting information from your MC. I would be concerned that they were trying to hide something from you. All the more reason for the Board to take a look at the service you are getting from this MC. Perhaps telling the MC if they are not a little more cooperative that you will be taking your business elsewhere, of course you need other Board members to back you up on this. If an independent CPA is involved with your HOA, they should be made aware of what is going on between your HOA board and the MC, especially if the CPA prepares an Audit for your HOA. They need to be alerted to any suspected risk that may involve fraud. If an audit is prepared for your HOA, you might want to consider orgainizing an audit committee. The CPA is required to discuss the audit with the audit committee. But even without an audit committee, there should be some communication between the Board and the CPA who performs the audit. If you do not have an audit performed, fraud risks are still evaluated by the CPA for a review or compilation, but just not as extensively. Before, just contacting the CPA yourself, I would check your CC & R's and operating agreements to see if there is some protocol listed as to how this commumication should be handled. Talk it over with other Board members and come to a consensus. But you definetly have the right to call the CPA as a Board to get a copy of the tax return.

Although HOA's organize themselves as a non-profit organization, they are not treated as such for IRS purposes. If you file an 1120 or 1120H for taxes, those were due on 3/15/08, unless for some reason you have a different tax year than the calendar year, but you would need permission from the IRS for that. But like individuals, corporations (Form 1120 and Form 1120H are actually corporate tax filing forms), extensions can be applied for and are granted. If you have a CPA that files your tax returns, and if it wasn't complete by 3/15/08, my guess is that an extension was filed, (a copy of the extension will be part of the tax return, ask for a copy). Something that you could ask about, because if they knew it was going to be late the extension should have been filed, otherwise another incident to illustrate that they are not acting in the best interest of your HOA. Chalk that up for points and after so many points, fire them and look for a more reputable MC.

Sidney,

Michele and Dee have both given you some good advice.

As far as determining which vendor is incorpoated and which is not, don't worry about it. If they're incorporated, they probably use "Inc" after their business name. It's not hard to find out if they really are incorporated; it should be on file somewhere, perhaps with your Secretary of State's office. If they don't have "Inc" after their business name, or if the use "LLC" or something like that, they probably are not. But, as was said before, don't worry about it. Just send them a 1099 anyway.

I think Michele also gave you good advice about not worrying about past deeds. You can't be held responsible for what the treasurers before you did or did not do. You can be held responsible only for your own actions as treasurer.

What does a treasurer do? Your responsibilities should be stated in the bylaws. It's not uncommon to have the routine tasks performed by a management company, but the treasurer is responsible for overseeing the tasks - sort of like a supervisor would be, for example. In our HOA, the MC receives the bills from the vendors and cuts the checks, but the treasurer gets a report on the bills and has to sign the checks. The MC prepares the financials, records all incoming and outgoing funds, collects homeowner assessments and makes the deposits, but all that activity is placed into (a rather lengthy) report each month which is then given to the treasurer for his review. Our treasurer and the MC have done battle on more than one occasion. The MC has all the tax forms completed, but our treasurer reviews them and signs them before they are sent to the IRS.

Can you take the tasks over? Probably yes, that's your prerogative. But, since you're paying your MC to do it, why should you? You're job should be one of reviewing, not one of doing. Maybe your MC is not used to working with someone who wants to be so closely involved. The idea of having a management company performs these tasks is that, being professionals, they are supposed to know what tasks need to be done, how to do them efficiently, and have the resources to do them. As stated previously, you're job should be to review their work. Remember, you are responsible to the homeowners.

Now, for the 1099s. What to do. First, if they were not done, is it your responsibility? I would say, for tax years prior to 2007, probably no. As for tax year 2007, that's more difficult to answer. If you were treasurer as of Jan 1 of this year, then I would say definitely, yes, you should have prepared 1099s and sent them out in January. If you recently became treasurer, should you file them now, knowing they haven't been done for tax year 2007? Probably yes. However, you must recognize the following:

1. If you prepare and file 1099s for tax year 2007 now, you will incur a penaly, since they are being filed late. This will cost your association money.

2. Some vendors may be very unhappy with you. If a you send a vendor a 1099 now, after he/she has already filed their 2007 income tax (the dreaded April 15 deadline has passed, remember?), and if he/she has reported your payments as income on their tax returns, and if the amount closely matches what you show on the 1099, then, no big deal. They don't have to send the 1099 to the IRS anyway (only you do that), so there's nothing those vendors have to worry about or do. BUT (and here's the big but), if you send a vendor a 1099 and that vendor has NOT included your payments as income or if the amount he/she reported differs substantially from what you show on the 1099, then he/she is going to be very, very, unhappy! That vendor now has to decide whether to just ignore it (and risk getting caught by the IRS), or to take the safe path and file an amended 2007 tax return and paying a penalty plus interest for the income that was not reported.

Tax forms signed by the secretary? I've never heard of that. I'm the secretary of our HOA and I've never signed any. Our treasurer does that. Hey, maybe the treasurer is supposed to sign the minutes in your HOA!

Sounds like your board runs a strange ship.

Yes. They I suppose they can, if they have to copy them for you. I think they are being petty if you copy them yourself. But hey, it IS their office equipment that they use for more than just your HOA.

Why not take them yourself to a kinkos? They are, after all, your files.

It is perfectly feasible for you to go to their office, as they indicated you can do, and review any and all docs you feel you need to.

This is an excellent way for you to end the tug-of-war power struggle game.

I'd stop by Starbucks, pick up a large coffee, make myself at home in their office and copy my little heart out.

That way is much easier, too, as there is no long, drawn-out email dialog. Communication goes much more smoothly when you can eyeball each other and provide immediate verbal feedback and clarification. "No, I didn't mean THOSE files, I meant THESE files."

Anyway, two more comments on their communication to you:

1) "The Board would make the decision for an audit." {-- This is absolutely correct. I find it odd that people often expect the management companies to be giving direction and advice on how boards should run their own HOAs. But, then again, some do that for free, just for the power trip, I suppose.

2) "The Associations financials were given out at the Annual Meeting to all members." { -- I think they need another reminder that you are not simply an HOA "member," you are an officer of the board and you are a specific officer of the board, the treasurer. As such you would require financial reports on a monthly basis. It should be part of their responsibility to your HOA and I would ask them, in person once I got into the office, exactly what reports they feel the treasurer should NOT have.

Anyway, good luck to you. Sounds like there is definitely a power play going on. Hope you can remain above the fray and keep your goal in mind -- providing leadership for and on behalf of your Homeowners.

Mary,

It doesn't work that way here. The president isn't familiar enough with the financial records to sign them, how can he possibly attest to the fact that they are accurate? That's what his signature means. Does someone else sign your tax return? Everybody has a job to do. The president does his, the vice president, secretary, treasurer, etc. each do their own jobs. Nobody messes in somebody elses sandbox.

Maybe your bylaws are set up so that is required to be done that way. I've said many times over, each state is different, and each HOA is different. There may be similarities, but there are also a lot of differences and no way is the "right" way.

Personally, I would not be happy giving one person so much power and authority. Our government knows better, so should our HOAs. We've all seen on this very forum what happens when a president assumes too much authority.

Nothing like good ol' checks and balances.

Hey guys, I'm new to the board. I noticed a wide range of answers to the original 1099 question. I hope you got the correct answer figured out. I have some knowledge on this topic, so feel free to ask. The posting I agree with the most is DeeB's. Always refer to the source when in doubt.

Do any of you know any good accounting firms you can recomend? I am interested in getting bids. If you would share some names and numbers I would really appreciate it.

couple things:

keep making the requests, very nicely.

think about audio recording your dealings with the PM, and keep your cool while you do.

Ask the president for specifics on HOW you were rude, exactly. Make the PM put in writing her feelings, what she heard, etc.. Don't judge it, just get it in writing so you can avoid those words in the future.

give the president your calm, rational side of the exchange, preferably written out, AFTER he gets one from the PM (prepare it before, but don't give it to him until the PM has done some work).

Dear Sydney P : I have been the treasurer of my hoa for over 12 years I went thru everything you are starting to go thru. Here is the easy way out for you on all this nonsense. Keep in mind most Treas are lazy people thats why HOA's are such a mess. The attitude that its not my job man.
So you need to make your presence known to 1 and all at the MC When you call state " This is Mr/Mz Blank the Treasurer of Blank HOA. Every time. Find out there system for geting checks cut. Have the accts payable person email you a blank check request. Save it to your desktop. Remember when you email or fax it to your mc insure you have a invoice for every fax Check Request (CR)
Does your MC use TOPS Program for cost control and utilization. If not make them use it it will solve all your problems believe me you have no idea how it puts them in a corner with no way out other than what you want.
When you call the MC do not use email for everything and save copies into your desktop. I cut and paste to a folder labeled what ever I save them as a word doc and then move them into folders. Why email simple everything is in writing.

When you want something specific cc the entire board. If you have BOD members without computers make it manditory by putting it on your agenda item " TREASURER REPORT " I do a monthly copy to all BOD members showing where we spent too little as well as too much.
My financial is:

OPerateing Account Starting Balance
Ending Balance

Reserve Account Starting Balance
Ending Balance

Budget Status: Whats on target whats over target.

Make up your own format but make sure you start out the first month with at least that amount of data.
Month 2 Make the MC give copies in the BOD Packages a copy of the TOPS Report for the last day of the month.

After month 1 contact your banks and demand to have online access to all of your accounts . Get used to checking them every week.On the check rewquest form from your MC add a line for TOPS Codes for the item to be charged to. If you have dummies at your MC Accts Payable send them multiple check requests with each invoice for each seperate item if your vendor gets cute with 1 master invoice for there monthly statements. Inform all your vendors that copies of all invoices are to be emailed to you as well as Faxed to the MC. If they dont like it then start watching there invoices witha fine tooth comb. Cause angry vendors mean shenanigans is going on with them someone is getting paid under the table.

After Month 2 and the MC says its too expensive for them to buy TOPS volunteer that your hoa would pay 50 percent of the purchase amount divided among all there HOAS and Condo Boards that they manage. There owner will love that idea. Now he/she becomes your friend
THE MAFIA MAY BE CROOKED BUT SOME OF THERE CONCEPTS ARE WORTH EMULATING IE Keep your friends at arms length and your employees against your breast. The same is true with MC they all have an a owner get his / her email address the same for the office manager.

Month 3 motion for the BOD to have a Web Site. Thats your free avenue to your members. You have a designated page with your email on it get a email free account from aol or yahoo or msn or from the web site company. Get the web site thru your own MC that way they can link your access to every account in your hoa. If possible you also want access to all parts of the TOPS data on your hoa.
If you get that you know control all your finances. If your hoa has a yearly budget of over 300,000 dollars you must have a yearly budget. Contact American Express and use there Accountant till you find one of your own. By the new Florida Law awaiting Gov "Sunshine Man" signature geta copy of it HB 679 it becomes manditory no longer maybe.

In using this Blog remember every state has different laws and with the exception of the IRS they do not go over state lines.

Next hire a Collection Agency such as LIENCO that specialize in taking members to court and liening there homes for not paying there monthlys or yearlys or how ever you do it. I use a company from North Carolina we email them the data on our 305 members and they print the monthly statements fold them envelope them and mail them out from there office.

Next go to your Bank and set up a Lock Box account for all payments to your hoa. If your Bank dont do that move all your money to BANCO POPULAR they are everywhere in Florida and they do online as well as Lock Boxes. They bought out SKYLAKE BANK who were the only Banks in Florida that would oan money to HOAs and Condos. They also bought out Kislak Bank which was the 3rd Bank that loaned money to HOAs. Just in case you ever need a line of credit to build a clubhouse parking lots new pools etc. But they got very strict rules on how much they allow under the heading of Accounts recieveable on your monthly financials.

When your ready for more email me at [email protected] . PS I dont send out 1099s I wrote an email to the owner of my MC and had him answer in writing that they felt it was not necessary. When the IRS come after us I print a copy of the email and give it to the FEDS. I am not a licensed MC nor a Licensed PM either but I know what works and what don't work. I have attached a copy of the Bill I mentioned you will need acrobat reader version 7.0 its free to open the file. I also sent you a copy of A GOOD BOD from the state of florida select comm on hoas. Join carn its a great organization they will keep you up to date on all the dumb as well as good laws are leaders at the state capital drop on our heads. By having TOPS in use you can build your budget in a matter of 12 to 24 hours. Thats why I love TOPS its a record of every penny where its spent and how much was budgeted by monthlies as well as yearly. Put the major items on a blank spread sheet from EXCEL Program.

My co-hort you are about to get a huge edjamakation

Good Luck with your uphill battle Tried to send as a attachment no good. Sorry send me a email

Our social committee has a christmas party and hires a local bank who will not take a check (only cash)if we could get the appropriate information from himie. social security number, etc. should we give him a 1099? What about all our contractors, lawn, attorney, bug man, etc. do they get 1099's JMI

Jean,

Pay him with an association check or hire someone else. You can then use the cost of the band on your own association taxes. You are not required to provide a 1099 to this type of 1 time hire. The band is responsible to report and pay their own taxes. You file 1099's when you have hired a contractor like someone who is self employed.

Businesses that you hire like electrical and perhaps a landscaping company who are a company and send employees also do not need you to generate a 1009 . That is their responsibility to take care of their own income reporting.