What IRS Form 1120-H (2025) Is For

Form 1120-H is the U.S. Income Tax Return for Homeowners Associations that allows qualifying associations to exclude exempt function income from gross income under Internal Revenue Code Section 528 (IRS Instructions for Form 1120-H (2025)). To qualify, at least 60% of gross income must be exempt function income, and at least 90% of expenses must relate to property operations.

When You’d Use Form 1120-H for 2025 (Late or Amended Filing)

You’d file late if the association missed the April 15, 2026 deadline (or September 15 with extension) and received IRS notices. Amended returns are filed to correct errors in income, expenses, or classifications. Penalties include 5% per month up to 25% of unpaid tax, with a $510 minimum for returns filed more than 60 days late.

Key Rules Specific to 2025

• E-filing became mandatory for associations filing 10 or more returns of any type
  
  
• Late filing penalty minimum increased to $510 for returns more than 60 days late
  
  
• Tax rates remain 30% for condominium/residential associations and 32% for timeshare associations
  
  
• Refund claims must be filed within three years of the due date or two years of payment
  
  
• Annual election requirement: associations must file Form 1120-H each year to qualify
  
  

Step-by-Step (High Level)

• Gather transcripts: Request from IRS.gov or by calling 800-908-9946 to confirm filing history
• Complete the correct-year form: Use the 2025 version and ensure proper income classifications
• Attach schedules: Include required forms such as Form 4136, Form 3800, or others if applicable
• Submit: E-file through approved providers or mail to the IRS center listed in the instructions
• Retain records: Keep copies of returns, supporting documentation, and proof of filing for at least seven years

Common Mistakes and How to Avoid Them

• Misclassifying income: Exempt income includes only dues and assessments from members
  
  
• Failing to make annual election: The election must be made each year by timely filing
  
  
• Improper expense allocation: Only expenses tied to non-exempt income are deductible
  
  
• Not meeting 60%/90% tests: Failure disqualifies Form 1120-H filing
  
  
• Incorrect entity information: Errors in name, EIN, or address delay processing
  
  
• Ignoring extensions: File Form 7004 for a six-month extension, but remember it doesn’t extend payment deadlines
  
  

What Happens After You File

E-filed returns are processed in 2–4 weeks, while paper returns may take 6–8 weeks. The IRS may send notices requesting clarification or corrections. If taxes are owed, payment can be made electronically, by card, or through installment agreements using Form 9465. Associations maintain appeal rights, starting with IRS Appeals and extending to Tax Court if needed.

FAQs

Can I still file Form 1120-H if I missed the original deadline?

Yes, you can file late, but penalties apply and you may lose the Form 1120-H election for that year. Penalties include 5% per month up to 25% of unpaid tax, plus a $510 minimum for returns filed over 60 days late. Relief may be available under reasonable cause provisions or automatic extensions.

How do I get copies of prior year tax returns if we never kept records?

You can request transcripts for free at IRS.gov or by calling 800-908-9946. For complete return copies, file Form 4506 and pay the applicable fee per year requested. Transcripts show reported income and tax details, which helps verify compliance. Keeping transcripts on file ensures proper recordkeeping for late or amended filings.

What penalties will we face for multiple years of unfiled returns?

Associations with multiple unfiled years may face compounded penalties of 5% per month (up to 25%) for each year, plus a minimum $510 penalty for each return filed more than 60 days late. Daily interest accrues on both taxes and penalties. The IRS may also escalate enforcement, including liens or levies, for ongoing noncompliance.

Is there a statute of limitations on how far back the IRS can assess taxes?

Generally, the IRS has three years from the filing due date to audit or assess taxes. This extends to six years if income is underreported by more than 25%. If a return was never filed, however, there is no statute of limitations, and the IRS can assess and collect at any time.

Should I also file amended state returns if I’m filing late federal returns?

Yes, in most cases. States that conform to federal law generally require amended or late state returns if federal filings change. Deadlines and requirements vary by state, so check with your state’s revenue agency to avoid penalties. Filing both ensures compliance and prevents discrepancies between state and federal filings.

Can we switch between Form 1120 and Form 1120-H each year?

Yes, the election is made annually. Associations may choose Form 1120 if it provides better tax treatment in a given year. However, they must meet qualification requirements to file Form 1120-H. Careful comparison of both forms each year helps determine which results in lower tax liability for the association.

What if we discover errors in a previously filed Form 1120-H?

File an amended 2025 Form 1120-H by checking the “Amended return” box and submitting corrected details. Provide explanations for all changes and include any revised schedules. Refund claims must be filed within three years of the original due date, but amendments increasing tax liability can be filed at any time.

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