Chicago HOA & Condo Association Tax Preparation | Form 1120-H Filing
We File Your Association’s Return the Right Way, and Make Sure You’re on the Form That Saves the Most
Most HOA and condo association boards do not realize they are legally required to file a federal tax return every year, even if the association is a nonprofit under Illinois law and even if it owes no tax. The IRS treats associations as corporations, and the form you file, along with how you classify your income, directly affects how much tax your community pays.
Heard & Associates LLC prepares tax returns for homeowners associations, condominium associations, and community associations in Chicago. We handle your Form 1120-H filing, compare it against Form 1120 each year, and make sure your reserve interest and member assessments are reported correctly so your association stays compliant and pays the least tax legally possible.
📞 Call (312) 810-3603 or Book Your Consultation Online today.
What Our HOA Tax Service Includes
We handle the full association return from start to finish:
Form 1120-H vs Form 1120: The Choice That Costs or Saves You
This is where most associations leave money on the table or take on unnecessary risk. The IRS gives HOAs two ways to file, and it is an annual election, meaning you can file one form this year and the other next year.
Form 1120-H is the special return designed for HOAs under Section 528. It is a one-page form, it carries far less audit risk, and most importantly, your exempt function income, the dues, fees, and assessments your members pay, is completely excluded from tax. Only your non-exempt income is taxed, at a flat 30% rate (32% for timeshare associations). There is no alternative minimum tax.
Form 1120 is the standard corporate return. It taxes income at the flat 21% corporate rate, which looks lower, but it treats your association very differently. All money received is potentially taxable income unless specifically excluded, which makes reserves and excess member income a real risk area. It is more complex, carries higher audit exposure, and requires careful handling of elections like Revenue Ruling 70-604 and Section 277 carryforwards.
For most associations, Form 1120-H is the safer and smarter choice. But for some larger associations with significant non-exempt income, Form 1120 can save money. The only way to know is to run both, which is exactly what we do.
Does Your Association Qualify for Form 1120-H?
To elect Form 1120-H under Section 528, your association must pass two tests each year:
The 60% income test. At least 60% of your gross income must be exempt function income, meaning member dues, fees, and assessments paid by owners in their capacity as members.
The 90% expenditure test. At least 90% of your expenses must go toward acquiring, building, managing, maintaining, or caring for association property.
Your association must also be substantially residential, and no individual member can profit from its earnings except through property upkeep or a rebate of excess assessments. We verify you meet these requirements before filing, so your election holds up.
The Reserve Interest Trap That Catches Almost Every HOA
Here is the mistake we see most often. Boards assume that because their association is a nonprofit, none of its income is taxable. That is wrong, and it is expensive.
Exempt function income (member assessments and dues) is not taxed. But non-exempt income is, even on Form 1120-H. The most commonly missed item is interest your reserve account earns. Every dollar of bank or money market interest on your reserves is taxable. So are facility user fees like pool, clubhouse, or vending income, rental income, and payments from non-members.
If your books lump all of this together, your return is more likely to be wrong and more likely to draw IRS questions. We keep your exempt and non-exempt income cleanly separated so your filing is accurate and defensible.
HOA Tax Deadlines You Need to Know
For calendar-year associations, the return is due by April 15, the 15th day of the 4th month after your tax year ends. Associations with a fiscal year ending June 30 file earlier, by the 15th day of the 3rd month.
A common and costly scenario: the board waits for the annual audit to finish, misses the deadline, and never filed an extension. The fix is simple. We file Form 7004 by your original deadline for an automatic six-month extension, so you are never penalized for waiting on your financials.
Yes, Your Association Still Has to File
A few things worth making clear, because they trip up boards every year:
Being a nonprofit under Illinois law does not make your association tax-exempt with the IRS. The IRS does not grant HOAs automatic exempt status the way it does charities.
You must file even with no taxable income. If your only income is member assessments, you may owe nothing, but the return still has to be filed. With Form 1120-H, the election only happens by actually filing the form.
Skipping the return exposes your association to penalties. The safest path is to file correctly and on time, every year.
Why Chicago Associations Choose Heard & Associates LLC
Thank you, Heard & Associates, for handling my 2025 tax return with professionalism and care. I will definitely be a returning customer next tax season! ⭐⭐⭐⭐⭐
I always seem to have so many questions and Darrel always seems to have the answers.
If you are looking for a company and person that will be honest and get your taxes completed in a timely manner… he is it.
He was thorough and extremely knowledgeable. All questions were answered clearly, deadlines were met, and the entire process was seamless. I felt confident knowing my finances were handled with accuracy and care. I highly recommend his services.
They were extremely thorough and detail-oriented, making sure everything was accurate and done in my best interest. What I appreciated most was how stress-free they made the entire process — that alone is priceless. I walked away feeling relieved, informed, and confident about my finances.
I highly recommend Darrel Heard & Associates to anyone looking for an accountant they can truly trust.
He brilliantly solved long and short term issues with immense professionalism. I felt heard, I felt protected, and educated in the process. He was generous with his time and genuinely cared about the success of my company. The service was thorough and cost effective, he has my gratitude. I highly recommend them!
Always available to answer questions and explain everything clearly.
I highly recommend them for anyone looking for accurate, efficient, and trustworthy tax services.
I had such a great experience with Heard & Associates! Mr. Heard was professional, patient, and really took the time to explain everything in a way I could understand. The company made filing my taxes so easy and even helped me get my finances more organized for the future. You can tell they truly care about their clients. I’ll definitely be coming back every year and recommending them to my friends and family!
They helped me organize my business finances, maximize deductions, and develop a tax strategy that truly fits my goals. I really appreciate their attention to detail, quick communication, and how they make what could be a stressful process feel easy and efficient.
They’ve completely transformed how my business handles its financial records. Every transaction is tracked, categorized, and explained clearly, so I always know where my money is going and what my cash flow looks like. Their bookkeeping services are not only thorough but also easy to understand — they take the time to explain reports and help identify opportunities to save or scale.
What I appreciate most is their consistency and communication. They respond quickly, provide monthly updates without being asked, and make sure all my accounts are clean and compliant come tax time. It’s rare to find a team that combines deep expertise with such genuine care for their clients’ success.
If you’re looking for an accounting firm that truly treats your business like their own — especially when it comes to keeping your books in order — I highly recommend Heard & Associates. They’re reliable, transparent, and simply excellent at what they do.
Schedule HOA Tax Preparation in Chicago
Whether you run a homeowners association, a condominium association, or a community association, Heard & Associates LLC prepares your return accurately, files the form that saves you the most, and keeps your board compliant year after year. Book Your Consultation Today and let us take HOA tax filing off your board’s plate.