Monthly Archives: February 2014

Render Unto Caesar

To my mind, one of the most outlandish obligations that we as management have to our client associations is to provide for their annual tax filings.
Sure I’m aware of the law: common interest communities are corporations and corporations have to file tax returns. That’s the cut and dried legal fact of it. From the real world standpoint though this requirement flies in the face of common sense and efficiency. 999.9 times out of 1000, no taxes are owed. If they are, it’s usually because the association was pursuing (imprudently, in my opinion) an appreciation rather than preservation strategy with its reserve funds. That or the tax preparer used the wrong forms. (Federal 1120-H, not the 1120.) So for the vast majority of common interest communities, this is merely an exercise in paper consumption.
I don’t begrudge the CPAs for turning this into an income stream. They’re simply responding to a need. And please don’t look to management to do this as part or in addition to the management agreement. Given that tax filing is required, it’s best to have an independent entity prepare such.
The cost is relatively inexpensive (round about $200) and the materials required—a balance sheet and profit & loss statement—are easy to produce. And heavens, don’t worry about the March 15th deadline. The six month auto-extension is almost de rigueur. So why am I grousing about this? The cost far outweighs the benefit, in my analysis.
In fact, I’m pressed to find any benefit. For the association, it’s money that could have been spent on spring plantings. For the fed and state, what is the purpose? Seriously, just to have everyone check in once a year? I’m with you, tax man on filing if there’s money owed. But so many so often owe nothing time after time, isn’t there a way to render unto Caesar without making those with nothing to render have to grind through all that paperwork?
As management, we have the obligation to keep our clients in compliance with all applicable statutes. Beware the Ides of March.