IRS Form 1099 Filing Requirements for Homeowners Associations – An Overview
If you are a homeowner residing in a subdivision or condominium, oftentimes, you are also a member of the Homeowners Association. While many homeowners don’t consider this to be a business entity- they are. Much like all other business entities, they are required to file 1099 forms with the IRS to report certain payments that they have made to non-employees during the tax year.
Here is an overview of how the IRS classifies HOAs, what their 1099 filing responsibilities are, and what you can expect to receive if you’ve been contracted by an HOA to do work.
What is a Homeowners Association (HOA)?
An HOA is an organization that is formed with the purpose of enforcing rules that are related to maintaining the quality and comfort of the community. The rules and restrictions that an HOA may vary depending on the community, however, the common denominator is that they charge residents a fee.
To purchase a home or condo in the community, joining the HOA is usually mandatory. The fees are typically used to help maintain the community and any shared spaces, like a pool, dog park, park, etc.
How does the IRS Classify HOAs?
Because most HOAs are formed with the goal of maintaining common areas within a community, they are generally incorporated as 501(c)3 nonprofit organizations. While this means that the organization is awarded certain tax benefits as a nonprofit, they are still required to file IRS information returns such as W-2s (employees) and 1099 (independent contractors).
This is not true for every HOA. However, some are part of a real estate management corporation or even a timeshare management company. Either way, the payments that an HOA makes must be categorized and reported throughout the tax year.
What is the 1099 Series of Forms?
The 1099 Series of forms is used to report a variety of different payment types to the IRS. This is typically related to the income and payment transitions that a business or individual makes to non-employees during the year. Some of the most common 1099 forms are-
- Form 1099-NEC – Used to report non-employee compensation payments made to independent contractors, vendors, and freelancers.
- Form 1099-MISC – Used to report miscellaneous payments made for rent, awards, $10 or more in royalties, payments made to an attorney, and more.
- Form 1099-K – Used by payment settlement entities that collect electronic payments through an online app or platform ( think PayPal, Cash App, and Venmo).
In addition to filing a 1099 Form 2023 with the IRS, the business must furnish the recipient of the payment with a copy of the 1099. This will be used for their
When should an HOA file a Form 1099-NEC?
Form 1099-NEC should be filed by HOAs whenever they make payments of $600 or more to independent contractors. The IRS classifies independent contractors as any individual who provides services but is not a permanent W-2 employee of the business or organization.
Here are two examples of when an HOA may or may not be required to file a Form 1099-NEC.
Example #1 –
An HOA contracts a business to provide lawn maintenance services for the common areas of their community. They pay the company $1000 a month to complete this task. In the course of a year, the HOA will have paid the contracted company about $12,000. Since this number is much higher than the $600 threshold, the HOA must file Form 1099-NEC with the IRS and furnish the landscaping business with a copy for their own business income taxes.
Example #2 –
The HOA hosts a town hall meeting for the residents of their community and hires a caterer to assemble a breakfast buffet. The cost of the catering is $450, and this is the only time that the HOA hires this particular catering company for an event during the tax year. Since the amount is lower than the $600 threshold, the HOA is not required to file a 1099-NEC for the services rendered. However, if the catering cost had exceeded $600, a 1099-MISC would be required.
When Should an HOA file a Form 1099-MISC?
The form 1099-MISC is used to report a variety of miscellaneous payments made to non-employees during the tax year. These payments should be reported if they exceed $600. The exception to this $600 threshold is royalties. Any royalty payments over $10 should be reported on 1099-MISC.
Here are two examples of when an HOA may or may not need to file a 1099-MISC.
Example #1 – The HOA rents a space from the local chamber of commerce to have their monthly association meetings. The chamber of commerce charges $50 dollars for the one-hour meetings monthly. At the end of the tax year, the HOA should file 1099-MISC with the chamber of commerce to report their rent because they’ve paid $600 over the course of the year.
Example #2 – The HOA offers a cash prize at an event, and the winner receives $200. Since this amount is under the $600 threshold, the HOA is not required to issue and file a 1099-MICS. However, if the cash prize had been larger than $600, the HOA would be required to file and furnish the prize winner with a copy of 1099-MISC.
What should I do if I receive a Form 1099-MISC/1099-NEC and a 1099-K?
Form 1099-K reporting will change for the 2023 tax year, the threshold for reporting has been lowered to include all payments of $600 or more. This means that many more payments will be recorded on Form 1099-K.
This also means that more 1099-Ks will be issued to payment recipients, in some cases independent contractors may receive a Form 1099-NEC and 1099-K depending on the payment method.
If you receive a 1099-NEC/1099-MISC as well as a 1099-K, you can likely file using the gross payment amount on Form 1099-K. To avoid any duplicate filings, the IRS advises that business owners keep their business and personal accounts separate.
It is also advised that independent contractors request that their payers not file a 1099-MISC/1099-NEC when paying them via an electronic payment method.
TaxBandits Streamlines 1099 E-filing for the 2023 Tax Year
TaxBandits offers a comprehensive solution for managing TIN (Taxpayer Identification Number) information, verifying it, and electronically filing 1099 forms.
If you’re managing a HOA and its IRS tax filing requirements, TaxBandits allows you to save time and increase the accuracy of your filings. We offer a streamlined solution for collecting TIN information via Form W-9 and e-filing Form 1099 at the end of the year with these awesome features:
- W-9 Manager: You can conveniently request, collect, verify, and securely store Form W-9 in one central location.
- Various Data Import Options: TaxBandits offers multiple ways to input your 1099 data, including manual entry, bulk upload, integrations with popular accounting software such as QuickBooks and Xero, and an API option.
- Error-Checking: Prepare precise 1099 forms confidently, thanks to TaxBandits’ built-in error checks that adhere to IRS Business Rules.
- IRS and State E-Filing: TaxBandits supports electronic filing with both the IRS and the requisite state agencies.
- Recipient Copy Distribution: To alleviate the hassle of distributing recipient copies, TaxBandits provides postal mailing and electronic delivery choices.
Automate 1099s with TaxBandits API
TaxBandits offers an API that HOAs can integrate with their existing software or portal to enable seamless 1099 automation, enhancing efficiency and accuracy.
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