What IRS Form 1120-H (2020) Is For

Form 1120-H is the U.S. Income Tax Return for Homeowners Associations that allows qualifying associations to exclude exempt function income, such as membership dues, fees, and assessments, from taxation. Only non-exempt income, like interest, rental income, or non-member fees, is taxed at a flat 30% rate for most associations, or 32% for timeshare associations.

When You’d Use Form 1120-H for 2020 (Late or Amended Filing)

You would file a late 2020 Form 1120-H if your association missed the April 15, 2021 deadline (or September 15 with extension) and received IRS notices demanding filing or assessing penalties. Amended returns are filed if errors such as misclassified income or overlooked deductions are found. Late filing results in losing the annual election unless reasonable cause is shown.

Key Rules Specific to 2020

• Tax rates: 30% for condominium and residential associations, 32% for timeshares.
  
  
• Associations must pass the 60% income test (gross income primarily from exempt sources).
  
  
• Must also pass the 90% expenditure test (expenses mainly tied to managing and maintaining association property).
  
  
• A $100 deduction is available against taxable income.
  
  
• Estimated tax requirements do not apply to associations electing Form 1120-H.
  
  

Step-by-Step (High Level)

• Gather transcripts: Request account transcripts for 2020 to check prior IRS activity
• Complete Form 1120-H: Use the correct 2020 version and mark “Amended return” if applicable
• Attach supporting schedules: Include schedules for income, deductions, and capital gains if needed
• Mail return: Send to Kansas City, MO or Ogden, UT depending on location
• Keep records: Save copies of the filing package, delivery proof, and supporting documentation

Common Mistakes and How to Avoid Them

• Misclassifying per-use fees as exempt when they are taxable income
  
  
• Failing to meet the 60% income or 90% expenditure tests
  
  
• Deducting general association expenses not tied to producing non-exempt income
  
  
• Applying the wrong tax rate or forgetting the $100 deduction
  
  
• Submitting with an incorrect EIN or legal name, delaying IRS processing
  
  

What Happens After You File

The IRS generally processes Form 1120-H within several weeks. You may receive an acknowledgment or balance due notice if additional taxes are owed. Associations unable to pay in full may apply for installment agreements online for amounts $25,000 or less. Interest accrues on unpaid balances from the original April 15, 2021 due date, and you maintain appeal rights for IRS adjustments.

FAQs

Can I still file Form 1120-H for 2020 even though it’s years late?

Yes, you can still file a late 2020 Form 1120-H. However, filing late means losing the election benefit for 2020, and you will likely owe late filing penalties. Despite this, filing is required to establish compliance, stop additional penalty accumulation, and properly update IRS records for your association’s tax obligations going forward.

What penalties will I owe for filing 2020 Form 1120-H late?

The IRS penalty is 5% of unpaid taxes per month, capped at 25%. For returns filed more than 60 days late, the minimum penalty is $435 or the tax owed, whichever is less. Interest accrues on both unpaid tax and penalties from the original deadline until all amounts are fully satisfied by the association.

Do I need to get tax transcripts before filing my late return?

While not strictly required, requesting 2020 account transcripts through IRS.gov or Form 4506-T is strongly recommended. Transcripts show whether the IRS has already filed a substitute return or assessed penalties, and they provide a baseline for accuracy. This helps avoid mismatched filings and gives your association a clearer understanding of its tax account history.

Can I get refunds from an amended 2020 Form 1120-H?

Refunds are only possible if claimed within the three-year statute of limitations. For 2020 returns, that deadline was May 17, 2024, due to COVID-19 extensions. After this date, you cannot receive refunds, even if you overpaid. However, filing an amended return may still be important to correct IRS records and reduce compliance issues.

Should I also amend my state tax return?

Yes, if your state requires conformity with federal tax filings. Many states mandate that amended federal filings trigger amended state returns. Rules and deadlines vary, so you must check your state’s Department of Revenue for exact requirements. Failing to file amended state returns when required can lead to penalties at the state level.

Will late filing affect my ability to use Form 1120-H in future years?

Filing late for 2020 does not disqualify your association from electing Form 1120-H in later years. However, each year is separate, and the association must meet qualification tests and file on time going forward. Repeated late filings may draw IRS scrutiny, so future compliance is critical to continue benefiting from Section 528 tax treatment.

What if I can’t pay the full amount owed?

If your association owes taxes but cannot pay in full, you may apply for an IRS installment agreement online if the balance is $25,000 or less and payable within 24 months. While this allows manageable payments, setup fees apply, and interest continues accruing until full payment is made. Filing promptly reduces escalating penalties.

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