Accounding: Fiscal Year vs. Calendar Year

Started by BW • 8 replies • 4643 views

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BW (Colorado)
Posts: 28

Posted:

My association's Fiscal Year is July 1-June 30th. We have just hired a manager who stated that we "should change to a calendar year". It seems to me that the change is more of a convenience to his bookkeeping then a reason for us to amend our Declaration. My question is:
what would be the advantage or the disadvantage to keeping our current July 1-June 30th year; or changing to a January 1-December 31st year?

JohnK3 (Pennsylvania)
Posts: 967

Posted:

BW,

As S/T of our HOA, and with minimal accounting skills, I have to agree with calendar years. Much easier for Membership (and me) to understand.

SusanW1 (Michigan)
Posts: 5,202

Posted:

Your fiscal year is stated in the Declaration? Is that common? I really don't know.

I'd say bookkeeping conveience is a REAL reason to change.

When is the Annual Meeting? When are the IRS forms due?

Those are also keep questions.

BW (Colorado)
Posts: 28

Posted:

My association's annual meeting is during the month of June. All forms are filed by September 14th. BW

ScottC (Indiana)
Posts: 23

Posted:

One good reason to change is if a calendar year fits a more natural business cyle for you. For example, we incur our greatest costs during the summer months. It would not make sense for our HOA in Indiana to end the fiscal year in the middle of the mowing/maintenance season. At the end of December, our costs in operating the HOA are minimal. Therefore, December is a logical end to the natural business cycle for us.

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

Quote:

Posted By ScottC on 08/12/2008 10:47 AM
One good reason to change is if a calendar year fits a more natural business cyle for you. For example, we incur our greatest costs during the summer months. It would not make sense for our HOA in Indiana to end the fiscal year in the middle of the mowing/maintenance season. At the end of December, our costs in operating the HOA are minimal. Therefore, December is a logical end to the natural business cycle for us.

Scott's post makes a lot of sense. I wouldn't worry much about coordinating the annual meeting with the close of the fiscal year, although it is convenient to hold it as soon as practicable after the books are closed.

BW (Colorado)
Posts: 28

Posted:

In Colorado, the Annual Homeowners meeting is held before the end of the Fiscal year because the next year's budget & assessments must be voted on by the owners. The proposed budget is sent out to the owners, along with prior meeting minutes and agenda at least two weeks ahead of the Annual meeting. If we changed to the Calendar year, the Annual meeting would be in December?

KirkW1 (Texas)
Posts: 1,665

Posted:

Wow, I would not have guessed that I would have much to offer on accounting, but here are several answers:

Tax paperwork is always filed in accordance with a fiscal year. And if you change then your tax filings have to change as well. This will mean an extra tax filing at the end of the calendar year.

If your annual meeting is tied to the fiscal year (as many are) then you will also change when the annual meeting occurs and need to budget for the extra meeting when you change.

If you get an annual audit you will also need to plan on an extra expense there as well.

On the other hand, any accounting software on the market will deal with a fiscal year quite well for you and it should be no big deal. It will quite readily handle and track your budget through the fiscal year.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Quote:

Posted By BW on 08/12/2008 9:29 AM
My association's Fiscal Year is July 1-June 30th. We have just hired a manager who stated that we "should change to a calendar year". It seems to me that the change is more of a convenience to his bookkeeping then a reason for us to amend our Declaration. My question is:
what would be the advantage or the disadvantage to keeping our current July 1-June 30th year; or changing to a January 1-December 31st year?

BW,

Some corps. are required to obtain permission from the IRS to change their tax year, others are not. This is not something that can just be done on a whim. I would suggest contacting your CPA to make a determination as to whether or not the HOA must obtain permission from the IRS. A Form 1128 must be filed to request a tax year change.

Are you saying the tax year is specified in your CCRs?

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