Let me start with the unasked question: can an officer (or Board member) in a condo or homeowners’ association in PA be compensated for those duties? The answer under applicable state law is NO. Board members (and officers) may be reimbursed for expenses incurred in performance of their official duties – such as mileage, supplies, postage and photocopying. So the waiver of monthly dues should stop immediately.
As to dues already waived, that is indeed income that should be reported. The Association should be issuing a 1099-MISC for the amount of dues waived.
Sara A. Austin
Austin Law Firm LLC
226 E. Market St.
York, PA 17403
This probably is income but this is something that should be discussed with an accountant.
Mark A. Nappier, Esq
Joye, Nappier, Risher & Hardin LLC
3575 Hwy 17 Business
Murrells Inlet, SC 29576
Since most community association governing documents prohibit trustees and officers from being compensated, our first recommendation would be to review your bylaws to determine if there is any prohibition on compensation. Very often a board may commence a practice – such as waiving trustees or officers assessments – not recognizing that it contradicts the governing documents. But because prohibitions on compensation for community association board members are so common, we suggest you look at your bylaws first. The typical set of bylaws does not prohibit trustees or officers from being reimbursed for board-approved out-of-pocket expenses; however, what you are describing is not that.
Assuming compensation to trustees and officers is not prohibited by your governing documents, the issue is whether it is income. While that question is best posed to your own or the association’s accountant, it is hard to imagine why it would not be income. Whether you paid the common expense assessment and the association paid you an amount equal to it as your compensation, or the association simply waives the collection of the assessment is inconsequential. As a member of your HOA you have a contractual obligation to pay a common expense assessment. When the assessment is cancelled, forgiven or waived, you are released from a debt that you otherwise lawfully owe. Generally, cancellation of a monetary obligation is considered income by the IRS and would be part of your gross taxable income. There are some exceptions to that general rule, but none would appear to be applicable here. Nonetheless, as mentioned above, it is best that you talk to your own, or the association’s accountant about this. It is likely that the association should also be treating the waived fee as an salary expense and therefore be issuing you a 1099 for it.
J. David Ramsey
1776 on the Green | 67 Park Place, Suite 702
Morristown, NJ 07960
Even though no cash is exchanged, receiving value in exchange for services rendered is considered bartering income by the IRS and is reportable on your income tax return. Because the value of the monthly dues that were waived is at least $600 (12 x $288 = $3,456), you should receive a 1099-MISC from your HOA that reports the fair market value of the barter exchange. You should report that value on your personal tax return as income, subject to federal and state income taxes. It is also important to consider if these services that you render constitute a trade or business and are therefore subject to self-employment tax. While that does not appear to be the case based on the facts provided, there are many factors that should be considered in making that determination. You should consult further with your personal tax advisor about the tax treatment of these amounts.
Elliott Davis, LLC
100 Calhoun St Ste 300
Charleston, SC 29401-3542