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Subject: IRS Audit
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Author Messages
GaryJ5
(New York)

Posts:5


02/14/2021 1:04 PM  
The IRS completed and on site audit for the year 2015. The audit was completed in 2017 and a bit into 2018. As of today their is one open item having to do with monthly maintenance fees being taxable. The governing Master Board refuses to give any information out to homeowners, but are collecting money in all homeowners fees called a reserve assessment allocation to pay for lawyer fees to fight the IRS. As of now they have over $300,000 in the allocation. We are also being told the IRS has asked for extension of 1 year before resolution. Questions:

1. Can they legally collect this money?
2. Does the IRS ask for extensions?
3. How much money do they owe the IRS if they are willing to pay law fees that high?
4. This is all done in secret without homeowners agreeing?
MelissaP1
(Alabama)

Posts:9972


02/14/2021 1:13 PM  
Need a few more details on your HOA. Is it a non-profit for for-profit corporation? That will make a difference on what the IRS involvement is. Plus confused as why collecting/allocating money for a legal fight back in 2018? Are you saying the HOA owes the IRS and the HOA paid a lawyer to battle it?

The laws have changed regarding fights against the IRS in recent years. More rights for the tax payer versus the IRS. The IRS has more burden to prove their case.

Need a bit more details before can properly answer all the questions.

Former HOA President
SheliaH
(Indiana)

Posts:3805


02/14/2021 1:29 PM  
I've never heard of the IRS asking for an extension - perhaps this is already in court and they asked a judge (either side could request a continuance).

As for your board, keep in mind this smells like a complicated legal matter that will likely have a lot of twists and turns before it ends, so some of your questions might not have a definitive answer at this time. There's also attorney/client privilege so some of this may not become known until after the legal battle ends. That said, your board needs to be more candid as to what has happened, so you should rally together your neighbors and demand they speak up. If you need a special homeowner's meeting where the association attorney and whoever else is working on this need to attend to answer questions, so be it. Otherwise, this really isn't the best place for questions like this.

As for the legal costs, we ARE talking about tax issues and when those commercials say don't mess with the IRS, trust and believe this isn't a good idea. You need the best counsel the association can afford, but I don't know why they're calling it a reserve assessment whatever. Reserves are a separate fund designed to help the association pay for major repairs and replacement of the common area, like roofing. Maybe they think saying "reserves" will make it sound better than "we're going to need a helluva lot of money to pay the attorneys to fight the IRS and since this blows our legal line item sky-high, this is the only way we can explain it to homeowners and get away with it.

TimB4
(Virginia)

Posts:17373


02/14/2021 2:11 PM  
Posted By GaryJ5 on 02/14/2021 1:04 PM

1. Can they legally collect this money?
2. Does the IRS ask for extensions?
3. How much money do they owe the IRS if they are willing to pay law fees that high?
4. This is all done in secret without homeowners agreeing?




1. Probably - read your governing documents about special assessments

2. With staff shortages, due to pandemic, it's possible.
IRS doesn't pay interest on returns, but they did with mine due to the length of time it took to process due to the pandemic.

3. Good question. One only your board would have an answer to.

4. The board is elected to run the Association. Membership input isn't required. I think the members should be informed, but it's likely the board is simply trying to deal with the issue and not thinking about transparency.



I suspect that the Board used form 1120 vs. 1120-H to file taxes that year.
GaryJ5
(New York)

Posts:5


02/22/2021 7:07 PM  
To add to my IRS question. The Corporation is a not for profit, but it doesn't consider itself a HOA under the Florida statutes 720. It is a Master Board under Florida corporation 618. It did away with the HOA in 2002 5 months before assuming control of the park. Upon further investigation the IRS does ask for extensions including up to 1 year when the statute of limitations is running out. Adding a twist to the story the corporation or it's EIN number don't show on the IRS website. Can anyone also suggest what the average legal fee their association pays per year to their attorney? We are paying around $160,000 per year, and have a special assessment included every month for lawyer fees beyond what already is in the budget. The major problem is he Master Board doesn't have to be open to homeowners, and they don't have any over watch. The last thing is I forgot to mention that the MB never paid taxes to IRS even though besides the monthly homeowners fees they have major for profit businesses. just an update for everyone.
GaryJ5
(New York)

Posts:5


02/22/2021 7:07 PM  
To add to my IRS question. The Corporation is a not for profit, but it doesn't consider itself a HOA under the Florida statutes 720. It is a Master Board under Florida corporation 618. It did away with the HOA in 2002 5 months before assuming control of the park. Upon further investigation the IRS does ask for extensions including up to 1 year when the statute of limitations is running out. Adding a twist to the story the corporation or it's EIN number don't show on the IRS website. Can anyone also suggest what the average legal fee their association pays per year to their attorney? We are paying around $160,000 per year, and have a special assessment included every month for lawyer fees beyond what already is in the budget. The major problem is he Master Board doesn't have to be open to homeowners, and they don't have any over watch. The last thing is I forgot to mention that the MB never paid taxes to IRS even though besides the monthly homeowners fees they have major for profit businesses. just an update for everyone.
MichelleG7
(Connecticut)

Posts:48


02/22/2021 10:21 PM  
see if you can find the case look up in the .gov area.. for foreclosures and such the case is public records. you might be able to find the case on the internet with all the forms explaining everything you want posted there. would not let a BOD keep this information from me.
SteveM9
(Massachusetts)

Posts:3604


02/23/2021 7:31 AM  
Can anyone also suggest what the average legal fee their association pays per year to their attorney? We are paying around $160,000 per year, and have a special assessment included every month for lawyer fees beyond what already is in the budget.


$0

We have competent people running things that don't cause problems that need to be cleaned up by a lawyer.
JohnC46
(South Carolina)

Posts:10607


02/23/2021 9:17 AM  
We pay about $500 per year and mainly do to liens, court actions to collect past dues. We are 112 standalone, patio homes.
MichaelS56
(Minnesota)

Posts:103


02/24/2021 5:57 AM  
Our association has an annual line item for attorney fees set at $500.00. We have used the HOA attorney once in the past 9 years to review our updated Declaration.
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