Yes — even though most of an HOA's income comes from member assessments rather than profit-generating activity, the IRS still requires most associations to file an annual federal return. This surprises a lot of new board members and treasurers, since HOAs are often thought of as informally exempt simply because they're not run for profit.
Skipping this filing isn't a quiet oversight — it can trigger penalties and interest that accumulate the longer it goes unaddressed.
Most associations can elect to file the simplified 1120-H, which is specifically designed for homeowners associations and generally taxes only non-exempt income (like interest earnings) rather than member assessments. The standard Form 1120 is more complex and can offer certain tax advantages in specific situations, but it also comes with more detailed reporting requirements and generally isn't the default choice for most associations.
The 1120-H election has to be made annually — it isn't a permanent status once chosen, so this decision needs to be revisited each filing year.
Filing deadlines, the specific percentage-of-income tests required to qualify for the 1120-H election, and accurately separating exempt assessment income from non-exempt income (like interest or rental income from common areas) are the areas that most often trip up volunteer treasurers. Getting the full picture on filing requirements and mechanics — covered in more depth on the homeowners association tax return page — before the filing deadline approaches avoids a last-minute scramble.
Many associations use a CPA familiar with HOA-specific tax rules rather than a general small-business accountant, since the 1120-H election and its qualifying tests are a narrow specialty most general preparers don't encounter often.
