Association Tax Return Filing Requirement

Association Tax Returns

"The hardest thing in the world to understand is the income tax." 

~ Albert Einstein

I wanted to touch on this topic since tax season is still fresh in everyone's mind. I'm sure everyone has filed their personal taxes, and paid the second installment of property taxes, but has the tax return for your association been filed? If you don't know the answer to that question then I recommend taking a second to check the status of your association's corporation with the State of California. The process is easy and only takes a minute:

1) Go to: http://kepler.sos.ca.gov/cbs.aspx

2) Under "search type" check the box next to "corporation name"

3) Fill in your association's name under "entity name or number"

4) Hit the search button

After your search results are displayed on the screen, you will want to pay attention to the "status" of your corporation. If your "status" is "active" then you're in good shape! Should the "status" read "suspended" or "inactive" then you're, well, in bad shape (at least with the State). There are a few different reasons for a suspended corporation, but many times it's an oversight with filing a tax return ... Or multiple years of tax returns!

CAUTIONS TO CONSIDER IF YOUR CORPORATION IS SUSPENDED/INACTIVE: 

Director & Officer (D&O) Insurance: If your association's corporation is suspended, and you're paying for D&O coverage, are those premium dollars being wasted? You should ask your insurance broker that question, but most likely you're wasting money because there is no corporation, much less a Board of Directors.

Due Diligence: If you're looking at buying into an association check and make sure the corporation is active. If the corporation is suspended there could be years of back taxes and penalties owed to the Franchise Tax Board and IRS. Those penalties could be a tough pill to swallow for a new buyer. 

Corporate Protection: The whole purpose of setting up an association's corporation is to protect the membership. The corporation limits liability and affords protection to all members of an association. If your corporation is suspended, then your opening yourself up to unnecessary liability. 

We've worked through many "broken associations" on the front end of taking over an association. It's a lot of work but even 40 years of back taxes can be resolved. We're here to help and have a team of professionals ready to assist you.