Every HOA that meets basic IRS eligibility requirements can elect to file the simplified 1120-H form each year instead of the more complex standard corporate return, generally taxing only the association's non-exempt income (like bank interest) rather than member assessments. This election must be made fresh each filing year — it's not a one-time, permanent status — so boards need to confirm eligibility and file on time annually.

An accurate return depends on clean underlying financial records — specifically, a well-maintained chart of accounts that clearly separates exempt assessment income from any non-exempt income the association earned during the year. Sloppy categorization during the year makes tax time significantly harder, since someone has to untangle which income actually needs to be reported.

The main things to watch are the specific income-percentage tests required to qualify for the 1120-H election, filing deadlines, and making sure whoever prepares the return actually understands HOA-specific tax rules rather than treating it like a standard small-business filing. Many associations work with a CPA who specializes in community associations for exactly this reason, since general tax preparers don't always encounter these narrow rules often enough to stay sharp on them.

Boards should also keep prior years' filings organized and accessible, since a consistent filing history matters if the IRSever has questions about a specific year's return.