The correct answer is IRS Form 1120-H, which is specifically designed for homeowners associations and community associations to file taxes. This form allows these organizations to report their income and expenses effectively while benefiting from a simplified tax process.
One of the key advantages of using Form 1120-H is that it enables community associations to be taxed on their income at a lower rate than other types of businesses, as it generally qualifies for certain deductions and exemptions. Additionally, this form allows associations to be taxed only on their non-exempt function income, which adds to the financial efficiency for these organizations.
In contrast, IRS Form 1040 is intended for individual taxpayers, Form 1099 is used to report various types of income other than wages, salaries, and tips, typically for independent contractors and freelancers, and IRS Form 1120 is the standard corporate tax return used by corporations doing business in the United States, which does not apply to community associations specifically. Using the correct form ensures compliance with IRS requirements and optimizes tax obligations for community associations.