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income. Permissible methods include

funds transfers to make all federal tax

estimated tax. Because the election is

cash, accrual, or any other method

deposits (such as deposits of

not made until the return is filed,

authorized by the Internal Revenue

employment, excise, and income tax).

Form 1120-H provides lines for

Code.

Generally, electronic funds transfers

estimated tax payments and the

are made using the Electronic

crediting of overpayments against tax

Change in accounting method.

Federal Tax Payment System

if estimated tax payments or

Generally, the association must get

(EFTPS). However, if the association

overpayments apply.

IRS consent to change its method of

does not want to use EFTPS, it can

accounting used to report taxable

arrange for its tax professional,

Interest and Penalties

income (for income as a whole or for

financial institution, payroll service, or

the treatment of any material item).

other trusted third party to make

Interest. Interest is charged on

To do so, the association generally

deposits on its behalf. Also, it may

taxes paid late even if an extension of

must file Form 3115, Application for

arrange for its financial institution to

time to file is granted. Interest is also

Change in Accounting Method. For

initiate a same-day tax wire payment

charged on penalties imposed for

more information, see Form 3115 and

(discussed below) on its behalf.

failure to file, negligence, fraud,

Pub. 538, Accounting Periods and

EFTPS is a free service provided by

substantial valuation misstatements,

Methods.

the Department of the Treasury.

substantial understatements of tax,

Services provided by a tax

There are some instances when

and reportable transaction

professional, financial institution,

the association can obtain automatic

understatements from the due date

payroll service, or other third party

consent from the IRS to change to

(including extensions) to the date of

may have a fee.

certain accounting methods. See

payment. The interest charge is

Rev. Proc. 2011-4, 2011-4 I.R.B. 330,

figured at a rate determined under

To get more information about

as modified, or its successor. Also,

section 6621.

EFTPS or to enroll in EFTPS, visit

see the Instructions for Form 3115.

, or call

Late filing of return. In addition to

1-800-555-4477. Additional

Change of Tax Year

losing the right to elect to file Form

information about EFTPS is also

1120-H, a homeowners association

Generally, an association must get

available in Pub. 966, The Secure

that does not file its tax return by the

the consent of the IRS before

Way to Pay Your Federal Taxes.

due date, including extensions, may

changing its tax year by filing Form

be penalized 5% of the unpaid tax for

1128, Application To Adopt, Change,

Depositing on time. For deposits

each month or part of a month the

or Retain a Tax Year. However,

made by EFTPS to be on time, the

return is late, up to a maximum of

under certain conditions, an

corporation must initiate the deposit

25% of the unpaid tax. The minimum

association can change its tax year

by 8 p.m. Eastern time the day before

penalty for a return that is over 60

without getting the consent.

the date the deposit is due. If the

days late is the smaller of the tax due

corporation uses a third party to make

or $135. The penalty will not be

For more information on change of

deposits on its behalf, they may have

imposed if the association can show

tax year, see the Instructions for

different cutoff times.

that the failure to file on time was due

Form 1128 and Pub. 538.

to reasonable cause.

Same-day wire payment option. If

Rounding Off to Whole

the association fails to initiate a

Late payment of tax. An

deposit transaction on EFTPS by 8

Dollars

association that does not pay the tax

p.m. Eastern time the day before the

when due generally may be penalized

The association can round off cents

date a deposit is due, it can still make

of 1% of the unpaid tax for each

to whole dollars on its return and

the deposit on time by using the

month or part of a month the tax is

schedules. If the association does

Federal Tax Application (FTA).

not paid, up to a maximum of 25% of

round to whole dollars, it must round

Before using the same-day wire

the unpaid tax. The penalty will not be

all amounts. To round, drop amounts

payment option, the association will

imposed if the association can show

under 50 cents and increase amounts

need to make arrangements with its

that the failure to pay on time was

from 50 to 99 cents to the next dollar

financial institution ahead of time.

due to reasonable cause.

(for example, $1.39 becomes $1 and

Please check with the financial

$2.50 becomes $3).

institution regarding availability,

Reasonable cause determinations.

deadlines, and costs. To learn more

If two or more amounts must be

If the association receives a notice

about making a same-day wire

added to figure the amount to enter

about interest and penalties after it

payment and to download the

on a line, include cents when adding

files its return, send the IRS an

Same-Day Wire Worksheet, visit

the amounts and round off only the

explanation and we will determine if

total.

the association meets the reasonable

cause criteria. Do not attach an

Payment of Tax (Line 24)

Estimated Tax and

explanation when the association’s

return is filed.

The association must pay any tax due

Alternative Minimum Tax

in full no later than the 15th day of the

These items do not apply to

Other penalties. Other penalties

3rd month after the end of the tax

homeowners associations electing to

can be imposed for negligence,

year. Do not include the payment

file Form 1120-H. However, a

substantial understatement of tax,

with the tax return.

homeowners association that does

reportable transaction

Electronic deposit requirement.

not elect to file Form 1120-H may be

understatements, and fraud. See

Associations must use electronic

required to make payments of

sections 6662, 6662A, and 6663.

-4-

Instructions for Form 1120-H

Instructions For Form 1120-H - U.s. Income Tax Return For Homeowners Associations - 2011 Page 4

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