A Stress-Free Guide to Annual Audits & Tax Filings for WA State HOAs

Financial oversight might not be the most exciting part of running a community association, but it’s one of the most important! Staying on top of annual tax filings and audit requirements keeps your community financially healthy, legally compliant, and running smoothly. The good news? With the right knowledge (and the right CPA), it’s easier than you think!

Let’s break it down—what your HOA needs to file, when an audit is required (or not!), and how to keep your association on the right track. 

Why Your Association Needs an HOA-Specialized CPA

Not all CPAs understand the unique financial landscape of community associations. A CPA who specializes in HOA accounting can help your board:

• ✅ File the right tax forms (and avoid overpaying!)

• ✅ Ensure compliance with Washington State laws

• ✅ Manage reserve funds correctly

• ✅ Keep financials transparent & audit-ready

Your HOA isn’t just another business—it operates under its own set of rules and tax structures. Having an experienced CPA is a game-changer!

Tax Filing: What Does Your HOA Need to Submit?

For federal tax filing, most associations use Form 1120-H, which comes with some great perks:

• ✔ Flat 30% tax rate (only on non-exempt income like interest earnings)

• ✔ Easier filing process than corporate tax returns

• ✔ Less IRS scrutiny—as long as your HOA follows the rules

Some associations may opt for Form 1120 instead, but it has a more complex tax structure. Talk to your CPA before making that call!

501(c) Status: Can Your HOA Be a Tax-Exempt Nonprofit?

Most HOAs are nonprofit corporations under Washington State law, but that doesn’t automatically mean they’re tax-exempt under IRS rules.

Here’s the breakdown:

• 🏡 501(c)(3) (Charitable Status) – Only applies if your association serves a public purpose (like affordable housing or education).

• 🌳 501(c)(4) (Social Welfare Organization) – Your HOA might qualify if it maintains open spaces or roads for public use.

Want to check if your HOA has nonprofit status? Take a look at your Articles of Incorporation—if it was set up as a 501(c), the language will be in there!

Audits: Do You Need One? Can You Waive It?

The word “audit” might sound intimidating, but don’t panic! Your CPA is well-equipped to tackle this task too, and some associations can vote to waive them! 

📌 Condo Associations (RCW 64.34 – Washington Condominium Act)

Audit required for condominiums with 50+ units, unless 60% of total owners vote to waive it.

📌 Homeowners Associations (RCW 64.38 – HOA Act)

Audit required if assessments exceed $50,000, unless 67% of owners at a meeting of the association where quorum is established vote to waive the audit.

📌 Common Interest Communities (RCW 64.90 – WUCIOA)

Audit is required if assessments exceed $50,000. For associations with assessments less than $50,000, the majority of owners may vote to waive the annual audit 

Not Sure What Statute Applies to Your HOA? 

What year was your community established? WUCIOA, or RCW 64.90, applies to all communities established July 2018 and after! Although, remember, WUCIOA For All is coming in 2028, which will update legislation for communities no matter when they were built!

The Bottom Line

• ✔ Work with an HOA CPA to keep your financials in check

• ✔ Most HOAs file Form 1120-H (but check with a pro to confirm)

• ✔ Review your Articles of Incorporation to see if your HOA has 501(c) status

• ✔ Know your audit requirements based on your HOA’s governing statute

Financial compliance doesn’t have to be stressful—especially when you have the right team behind you. At Spark Management, we’re here to help!

📩 Need guidance on audits, taxes, or financial best practices? Let’s chat! Reach out to Spark Management today.