All businesses and organizations, including homeowner associations, are required to file 1099 Forms, including Form 1099-NEC and 1099-MISC, when they make certain payments. The legal structure of your HOA (or condo association) does not matter. If it makes any payments that require filing these information returns, it must do so or face a stinging array of penalties.
Form 1099-NEC is a “new” (reinstated) information return used to report nonemployee compensation. Form 1099-NEC re-replaced Form 1099-MISC as the thirty-plus year reporter of nonemployee compensation in 2020. To learn about Form 1099-NEC’s history, please read our article Introducing IRS’s New Form 1099-NEC.
Information reporting can be highly complex, especially for HOA volunteers tasked with understanding and applying the rules. For this reason, we created the Form 1099-NEC and 1099-MISC Training Course to help businesses and organizations comply with IRS regulations. This article discusses some of the topics covered in this course, including the most common payments HOAs make that require Form 1099-NEC and 1099-MISC; Nonemployee Compensation and Rent.
Nonemployee Compensation: The most common payments HOAs make that require information reporting are for nonemployee compensation. As mentioned above, these payments now get reported on Form 1099-NEC. According to the IRS, nonemployee compensation occurs when payments get made for services to (most) unincorporated businesses and to individuals who are not employees. Form 1099-NEC is required when such payments equal or exceed $600 during the calendar year.
Because volunteer board members operate the vast majority of HOAs, payments requiring form 1099-NEC are easy to overlook. If, however, you’re aware of everyday activities requiring Form 1099-NEC, complying is far less stressful. Here’s a list of typical service payments that require Form 1099-NEC:
Rents: Rent gets reported in Box 1 of Form 1099-MISC. When rent payments of $600 or more get made to nonincorporated entities or individuals, Form 1099-MISC is required.
Rent includes amounts paid for office space or other space, including land, rented for HOA use. If, however, you are paying a professional property manager or real estate agent, Form 1099-MISC is not required.
The rental of machinery or equipment rented for HOA use can also require Form 1099-MISC. Examples include rented pressure washers, office or lawn equipment, and rent paid to businesses or individuals for items used at a community event.
Due Dates: The recipient copy of Form 1099-NEC and 1099-MISC (which is Copy B) should be mailed to them no later than January 31st of the year following payment. Both paper-filed (copy A) and electronically filed 1099-NECs are due to the IRS by January 31st.
Generally, paper-filed Copy A’s of Form(s) 1099-MISC, are due to the IRS by February 28th following the reporting year. When electronically filed, Form 1099-MISC is due by March 31st.
Reporting Complexities: As with most IRS reporting, Form 1099-NEC and 1099-MISC reporting is full of complexities that can make compliance difficult. For example, with some exceptions, HOAs are not required to send 1099-NEC or MISC to businesses taxed as corporations. Also, when HOAs make payments through a third party, such as an outside management company, the management company is often responsible for filing Form 1099-MISC.
There are also special rules for payments made by credit card, equipment rentals that include an operator, and fees for services related to the purchase of physical goods.
Backup Withholding Penalties: Tracking the amounts of rent and service payments to each business or individual during the year is very important. These payments can add up quickly, and 1099s are triggered when TOTAL payments made to any business or individual are $600 or more. For this reason, your HOA should have procedures in place to obtain each rental and service provider’s taxpayer identification number (TIN).
When an HOA fails to obtain the TINs of 1099 recipients, they must withhold and remit a portion of each payment to the IRS. This payment is called backup withholding. Failure to collect and pay backup withholding can result in significant penalties. Worse yet, these penalties can get assessed on both the association AND the individual required to withhold.
Form 1099 Training: Overnight Accountant created Form 1099-NEC & 1099-MISC Training Course to help HOAs and businesses avoid penalties related to 1099 compliance and backup-withholding. It covers the most common payments that require Form 1099 NEC and 1099-MISC. It also provides step-by-step instructions for completing each form and submitting them to the IRS.
BONUS: HOA Income Tax Training: Did you know that all HOAs are required to file a tax return every year? For most HOAs, this form is called Form 1120H. The good news is that most HOAs can file this return on their own with the help of our course, Form 1120-H Basics.
All courses and articles are for informational purposes only and do not constitute tax advice. Taxes are complicated - do not act on course information without consulting a professional. Always refer to treasury regulation before making any tax decision. Read the full disclaimer.
This course package is thorough and will give you a solid handle on how to optimize your business expenses to minimize your taxes and keep appropriate records to handle any IRS challenges. Only want to dive into a particular topic? Jump to that video and scan forward to where your issue is addressed. Or watch the whole series to learn it all!- Josh, Charles Town, WV, Real Estate Agent Tax-Cut Library, Agent Edition Course
I thought the course on 1120-h was excellent and have shared your website with other hoa board members. It was clear to me that Brett understood a volunteer HOA board that could not afford tax accountant guidance.- Terri S, Henrico, VA, 1120-H Basics Course
I haven’t practiced in the accounting field in quite some time and wanted a refresher. The Overnight Account course 1099-Misc Basics was very helpful! It was simple to follow along and understand each section. I would highly recommend this course! Staff were quick to answer my question as well. I love that I can review the modules again, if needed, at any time. I will definitely be using them again for more classes.- Tammy, Anchorage, AK, 1099-MISC Basics (Training Edition) Course
I haven’t practiced in the accounting field in quite some time and wanted a refresher. The Overnight Account course 1099-Misc Basics was very helpful! It was simple to follow along and understand each section. I would highly recommend this course! Staff were quick to answer my question as well. I love that I can review the modules again, if needed, at any time. I will definitely be using them again for more classes.- Tammy, Anchorage, AK, 1099-MISC Basics Course
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