Federal Form 1120. This is a regular corporate filing with a 15% tax rate on the first $50,000 of taxable income. The return is more difficult to prepare and requires associations to use more restrictive accounting procedures during the year. It also has a higher audit risk.

Excess Income Tax Resolution . If an association's CPA files tax Form 1120, any excess assessments at the end of the fiscal year (a budget surplus), must be applied to next year's assessments or refunded to the membership. Revenue Ruling 70-604 and 75-371. If the money is applied to next year's budget, members must approve an excess income resolution. Since the resolution does not require a vote by secret ballot, the membership can approve it by (i) a voice vote at the annual meeting and record the vote in the minutes of the meeting or (ii) include it on the ballot with the election of directors. See sample tax resolution.

Federal Form 1120-H. This filing is specific to associations, is easier to prepare, and has a lower audit risk. It applies a 30% tax rate to all non-dues income (interest earnings, laundry income, rental income, etc.). This filing does not require an excess income resolution. Even so, many associations routinely include the resolution on their annual ballot thereby giving their CPA the flexibility to file either tax form.

California Form 100. If an association has more than $100 in non-membership income, a return must be filed with the State at the same time as the Federal filing. Failure to file Form 100 can result in the suspension of the corporation.