Become our Member : JOIN SFPMA TODAY   LogIn / Register: LOGIN/REGISTER

SFPMA Industry Articles | news, legal updates, events & education! 

Find Blog Articles for Florida’s Condo, HOA and the Management Industry. 

Is Your HOA or Condo Board Doing A Good Job?

Is Your HOA or Condo Board Doing A Good Job?

Is Your HOA or Condo Board Doing A Good Job?

How Can You Tell If Your Board is Doing a Good Job?

There’s a lot of talk in the media and online about bad Boards of Directors, including our recent article on how to tell if your Board is stealing from the association. But how do you tell if the Board of your Condo or HOA is doing a good job? Not all Boards are bad, right?

The truth is, most Board members are honest people that meant well when they campaigned for election and mean well when they attend and vote in each meeting. They have reasons for making the unpopular decision that the residents complain about. Oftentimes those reasons are valid and the unpopular decision was actually the lesser of two evils. But, how do you know for sure?

What Makes a Board of Directors “Good”?

To find out what HOA managers and management company executives thought was the ultimate sign of a good Board, we conducted a survey on LinkedIn. The survey responses were almost tied. It turns out, there isn’t one ultimate sign. Instead of one thing that makes your Board great, there’s a list of things that make your Board of Directors successful… or not.

Financial Responsibility

The most popular survey response with 33% of the vote, having a well-funded budget and reserves is a hallmark of a good Board. But other factors go into good financial management as well. A good Board is honest when spending HOA funds and uses them for the good of the community. They communicate with the membership about the reasons for budget increases, how they are using the money collected, and what the process is for paying vendors and for dealing with homeowners who aren’t paying on time. Big projects are well-researched and planned to limit unexpected expenses that make special assessments more likely. Speaking of special assessments, good boards know that regular dues increases that keep up with inflation are a better way to fund projects than special assessments.

Proactive Maintenance of Facilities

Coming in at 29% of the vote is proactive maintenance of the facilities. This means little to no deferred maintenance in the community. All buildings, parks, equipment, etc. are inspected often. Preventative maintenance is completed because the Board knows it will save money in the long run. When something needs repair or replacing, it’s completed as soon as possible, because the longer it waits, the more it costs. What good does it do to have a well-funded budget if money is never spent on maintaining the physical assets of the community?

Productive, Peaceful Meetings

Tied with maintenance at 29%, some managers and executives felt that the number one sign of a good board is how it feels to attend their meetings. Good Boards can disagree without slipping into childish or inappropriate behavior. They read the packets and reports that management provides them before the meeting and show up prepared to vote. Members feel comfortable attending meetings, and because the Board sets a good example of how to behave, most of the members follow it.

Good Boards Set Goals

Another sign of a good Board is goal setting. It’s hard to steer a ship if you don’t know where it’s headed. A Board that plans ahead and sets goals for the direction the community should head in is a Board that has a better chance of getting there. A Board that doesn’t plan is going to find itself spinning around in circles.

Fair Collections

People might not like to talk about it because it can be emotionally uncomfortable, but to be good at their job the Board must do something about owners that don’t pay their dues. It’s not fair to the owners that do pay to have to carry the burden of those that don’t. But a good Board is not overly aggressive when it comes to collections. They make sure that the collection solution they use is fair, not predatory, and advocates for the association to collect every possible penny.

The Good Board Checklist

Do you want to grade the Board of Directors for your community to see how good or bad of a job they’re doing? Using the following checklist, give your Board 5 points for every answer that you checked “yes”.

  • Increases to assessments are small and regular
  • The budget, reserve study, annual review, and other financial reports are accessible to the members for review
  • Reserve funding levels are above 80%
  • Special assessments are rare
  • The final cost for projects is usually in line with the projected cost
  • Components are inspected often and repaired as needed
  • When components fail, they are replaced and not abandoned or removed
  • The Board behaves like professionals at meetings even when they disagree
  • Meetings are business-oriented and not popularity contests or social hours
  • Members are welcome and feel comfortable attending meetings
  • A goal-setting discussion happens at least once a year
  • Experts are consulted and their advice is considered when making decisions
  • The number of owners that are late on their dues is less than 10%
  • Collection practices are fair and judgments and foreclosures are a last resort
  • The Board uses a professional collection solution instead of doing it themselves

Now, add up those scores and see how the Board did. A great score is 60-75, a good score is 45-60, an average score is 30-45, a Board that scores 15-30 needs improvement, and if the Board scored less than 15 points you might be in trouble.

Even good Boards of Directors sometimes find that their collections could be improved. Contact us today to find out why Axela Technologies is a better collection solution than your attorney, and learn more about our options for helping you recover late payments from delinquent  owners.

 

By, Dee A. Rowe, Guest Writer

Tags: ,
What Are the Duties of Condominium Boards?

What Are the Duties of Condominium Boards?

What Are the Duties of Condominium Boards?

Condominium boards have complete management responsibility for their community. Even if they outsource some duties to a professional management company, boards still retain these responsibilities. Since individual homeowners, who may not be well-versed in real estate management and legal issues, serve on these boards, all members should understand their duties and responsibilities. Condominium boards should also retain experienced legal counsel and/or accountants to be information resources and advisers.

Condominium Association Bylaws

Board members must become intimately familiar with their condominium association bylaws. Management of all condominiums is governed by the association bylaws. Board members must understand all items addressed in the bylaws, often called the “condo docs.” Further, boards must learn all state statutes that relate to bylaw subjects and strictly follow the letter of state laws to avoid legal problems.

Common Areas and Building Exteriors

The condominium association board must maintain–and keep in good repair–all common areas and building exteriors. Common areas are those used by all unit owners who have deeded title to small percentages of these areas. These areas include building lobbies, open land or parks, tennis courts, pools and other amenities available to all residents. Whether a high-rise style, townhouses or cluster housing, building exteriors require maintenance and repair, particularly the siding and roofs.

Condominium Association Budget

Creating and managing the association budget is a critical duty for condominium boards. The most common reason for condominium problems is mismanagement or misuse of the budget. Association boards without an experienced accountant as a member should consider getting advice from an outside CPA to ensure that their budget is reasonable and complete. Condominium budgets should be built like those of nonprofit corporations. By estimating expenses, including insurance, landscaping, trash removal and similar operating costs for the coming year, the association board determines the amount of monthly individual homeowner assessments, commonly called “condo fees.”

Maintenance and Repair Reserves

Along with operating expenses, the association must carefully consider the funds needed as “reserves” for maintenance and repair. As part of the budgetary process, establishing realistic reserves is often overlooked by association boards, sometimes with dire consequences. For example, picture a 48-unit high-rise condominium, with each unit having a suspended wooden deck for relaxing and entertaining. Decks need periodic staining and water protection applications. Further, on older condominium projects, deck replacement would be needed at some point. Neglecting to build reserves into the annual budget for deck maintenance and replacement could result in “special homeowner assessments” of thousands of dollars. Condominium boards must diligently add these to annual budgets to build up cash to make these repairs.

Collecting Assessments

Monthly homeowner assessments–condo fees–must be collected by condominium boards. While most condominium bylaws permit boards to place liens on individual units for unpaid condo fees, liens do not equal money. Unit owners may not refinance or sell their homes for many years, leaving the condominium association short of funds to meet budget and reserve demands. Boards have a duty to establish an effective collection policy, much like a bank, to ensure consistent monthly cash flow into the association account to meet operating expenses.

Fiduciary Duty

Condominium associations must fulfill their fiduciary responsibility to manage the project in a businesslike and conservative manner. Depending on the size of the condominium project, association boards may manage many dollars and complex business issues. Fiduciary duty is typically measured by evaluating the actions of individuals or groups that “reasonably prudent” persons would take. For example, neglecting to collect condo fees, putting sufficient reserves in the budget or not completing necessary repairs is a breach of fiduciary responsibility. Condominium boards usually have individual and collective fiduciary responsibility and could be subject to serious lawsuits from unit owners for failing to act prudently.

 

Tags: , , ,
Want an emergency information guide you can use to uncover and list important information so that your loved ones know what to do in an emergency?

Want an emergency information guide you can use to uncover and list important information so that your loved ones know what to do in an emergency?

Want an emergency information guide you can use to uncover and list important information so that your loved ones know what to do in an emergency?

by RMS ACCOUNTING

𝐕𝐞𝐫𝐲 𝐒𝐚𝐝 𝐒𝐭𝐨𝐫𝐲 – Very old client dies leaving his wife to deal not only with his death but also with financial matters that she is unfamiliar with and not equipped to deal with. She has no where a copy of the will is or what attorney handled the will preparation. She also does not know what investment accounts in his name have TOD designation and how to deal with them as well as the house that is titled in both their names. This lady needs help and has no children or close friends to help her deal with these issues. While we can help make her get information on all the accounts that her husband had which had taxable transactions we can’t represent and handle the notification of banks and investment accounts or location of the will. The best we could do is refer her to an estate attorney we trust.
If you are wondering why I am telling your this it’s because we see the same thing over and over where an elderly person does not remember what assets they have and or know how to deal with them. We remind clients all the time that they need to make a list of their investments, bank accounts, insurance and other important information including the names of advisors and attorney and see that this list is easy for their loved ones to find when the need arises and the time comes.
Want an emergency information guide you can use to uncover and list important information so that your loved ones know what to do in an emergency just drop us an

Email at info@RMSAccounting.com with “Emergency Guide” in the subject line along with your name and mailing address and we will send you a printed copy of this important booklet, rather have a PDF copy just let us know at the same email address.

 

Learn more and contact us for all of your Accounting Needs: 

RMS Accounting

1-800-382-1040

RMS Accounting combines quality cost effective accounting and bookkeeping services with a team of tax accounting professionals to help clients make and save more money.

rms-accounting

RMS Accounting

Accounting and tax services are about more than just numbers on a page. Unlike other accounting firms, when you call us you will get a live human being not voicemail and unlike other accounting firms we will work with you on your business helping you to grow profits and cut taxes. Unlike other accounting firms we will tell you before we begin work exactly what it will cost for our help.

Our tax accounting professionals will be happy to assist you with; tax planning, tax preparation and tax representation.

Our tax accountants are EA’s (Enrolled to practice before the IRS). They know the tax laws and will make sure you don’t pay one penny more than you have to. Visit us for a free consultation with a tax accountant, who will review your tax situation, with you to determine the best course of action. The tax accountant will provide you with a free fee quotation.

 

Tags: ,
Its Budget time

Its Budget time

Its Budget Time, and that means it is that time of year for boards of community associations everywhere to prepare next year’s association budgets. A good budget is reflective of good financial planning. In practice, it is anything but an exact science.

When examining the community association budget process, there are a few subtle nuisances and a couple of glaring distinctions between those budget related laws set out within Chapter 720 that governs homeowner associations (HOAs) as compared to Chapter 718 that governs condominium associations (CAs). Let’s take a look.

 

Notice Requirements:

• HOA board meeting notices must include a statement that assessments will be considered and, as per statute, “the nature” of the assessments. There is no definitive advance HOA board budget meeting notice requirement set out in Chapter 720, so be sure to check your HOA’s bylaws for any specific requirements. (As an aside, please do not confuse this with the special assessment procedures where it is required for any meeting at which special assessments will be considered that written notice mustbe mailed, delivered, or electronically transmitted to the members and parcel owners and such notice must be posted conspicuously on the property or broadcasted on closed-circuit cable television not less than 14 days before the meeting.

• At least 14 days before any CA board meeting at which a proposed annual budget of an association will be considered, the board must hand deliver to each unit owner, or mail to each unit owner at the address last furnished to the association by the unit owner, or electronically transmit to the location furnished by the unit owner for that purpose 1) a notice of such meeting and 2) a copy of the proposed annual budget

 

Committees and Workshops:

• The HOA’s notice requirements apply to the meetings of any HOA committee or other similar body, when a “final decision” will be made regarding the expenditure of association funds.

• Meetings of a CA committee to make recommendations to the board regarding the association budget are subject to the Notice Requirements, above.

Providing Copies:

• The HOA must provide each member with a copy of the annual budget ORa written notice that a copy of the budget is available upon request at no charge to the member.

• The CA must send a copy of the proposed budget (showing reserves fully funded for the year) with the board’s budget meeting notice. Limited proxies for unit owner vote must include a statutory proscribed disclaimer regarding the inherent financial risk in rendering such a decision.

Budgetary Considerations:

• The HOA’s budget must reflect the estimated revenues and expenses for that year, along with expected deficits (bad debt) and surpluses. The budget must also set out separately all fees or charges paid for by the association for recreational amenities, whether owned by the association, the developer, or another person.

• The CA’s proposed annual budget of estimated revenues and expenses must be detailed and must show the amounts budgeted by accounts and expense classifications. The CA can only assess for such items as authorized by statute or the CA’s own governing documents.

 

Reserves:

• HOA reserves are not mandatory but can be mandatorily required only IF they were initially created by the developer orwere voted on, and approved, by a majority of the total voting interests of the community. Both of these types of HOA reserves are loosely referred to as “statutory” reserves. If your HOA assesses for “statutory” reserves, then the assessment revenues collected must only be used for authorized reserve expenditures unless their use for other purposes is approved in advance by majority vote at a meeting at which a quorum is present. If your HOA assesses for “non-statutory” reserves, (meaning that the budget may have a line item called “reserves”, but they are not “statutory” reserves), then there are no limitations on the board’s expenditure of these monies.

• CA reserves are initially mandatory in that all residential CA boards must pass the budget with reserves included. After, the unit owners can vote to waive or reduce the reserves. CA reserves can only be spent for their designated purpose unless otherwise approved by a majority of a quorum comprising the voting interests.

 

PRACTICAL TIP 1: Compare last year’s actual expenditures to last year’s budget, and also compare it to what is set out in the upcoming year’s budget. This simple comparison can be most illuminating.

PRACTICAL TIP 2: Take a look at the existing “bad debt” and see how aged it is. Determine whether it is time to “write it off”. In practical terms, this means that the dues paying members in good standing have to make up that shortfall as required to meet the ongoing expenses of the association. In the event that your community association budget does not include a bad debt line item, then consider adding a “bad debt” line item at this time.

 

Tags: , , ,
Guide to HOA Financial Statements

Guide to HOA Financial Statements

  • Posted: Oct 28, 2022
  • By:
  • Comments: Comments Off on Guide to HOA Financial Statements

HOA Financial Statements

Managing the finances of a community association is one of the most difficult, and most important, responsibilities of an HOA board of directors. Preparing detailed HOA Financial Statements on a regular basis serves a multitude of purposes from providing insight for financial planning, promoting transparency between the board and residents, as well as being a requirement by law in some instances. The frequency of preparation may vary depending on state laws, community bylaws, and the size of the association.

If you are having trouble preparing community financial statements, the professionals at CSM are standing by to answer all your questions. We have years of experience working with thousands of residents across the United States.

 

What is an HOA Financial Statement?

Simply put, an HOA Financial Statement is an official record that details all the financial activities of the community association. Specific details that must be included depends on state regulations and community bylaws, but there are some basic details that should be included regardless of size or location:

The most common mistake that people make when preparing HOA financial statements is not adding enough detail. Every detail that can be added, no matter how small, can provide a more thorough insight and lead to better decision making. When in doubt, include it.

It should also be put into an easy to read format. These documents will be available to everyone in the community, most of which do not have advanced accounting degrees. For an HOA financial statement to be effective, it needs to be prepared so that anyone can understand the content. Making it too complicated alienates people and hinders community relations.

 

How Often Do Financial Statements Need to be Prepared?

There is no standard frequency that HOA financial statements must be prepared. It will depend on state regulations, community goals, and the size of the community. Of course, the more frequently statements can be prepared, the more helpful they will be for the board of directors. Smaller HOAs with simpler budgets can prepare monthly without much problem. Larger associations with more complicated budgets may opt to prepare statements quarterly or annually.

No matter what decision is made regarding frequency, it must be maintained. Straying from the regular schedule only causes issues between the board members and homeowners. It leads to a feeling of distrust. When dealing with financial information, it is best to be open and honest in as much detail as is appropriate.

For smaller, self-managed associations, if there is trouble getting financial statements completed on time, it is relatively inexpensive to hire an accountant as needed to prepare balance sheets. This ensures that all the information will be completed in a timely manner without taking time out of community volunteer’s busy schedules. It also means that the statements have been professionally checked and relieves some of that stress from the board members as well.

There are also a multitude of services available from CSM to help homeowner’s associations get organized and prepare their own financial statements. With the professional support of an experienced team along with state-of-the-art technology, even the most inexperienced association members will be able to navigate the complicated waters that is HOA financial management with ease.

 

What is a Financial Statement Used For?

The obvious answer is that detailed HOA financial statements can be used by the community association board of directors to adjust budgets, dues, and allocate money for maintenance and projects. The more detailed the statement, the more effective the HOA.

It is a requirement for any sort of financial planning. For starters, if records are kept consistently, association directors can look back on previous financial years to identify patterns that could affect the current budget and adjust accordingly. It is also imperative to keep track of money owed. If detailed records are not kept, it can be near-impossible to keep track of delinquent dues or know how much money is available to budget for community maintenance and new projects.

In some states, it is a legal requirement for HOAs to maintain and submit regular financial statements. Even if it is not required in your state, it is a good idea to keep detailed records anyways as they will be extremely beneficial for all other aspects of homeowner’s association management.

Most importantly, having detailed financial statements readily available to all HOA members can promote transparency between the board and the community. If the homeowners can see what their money is going towards, they will be more agreeable and open with the board of directors. It promotes teamwork throughout the community.

 

Where Should the HOA Financial Statements Go?

As with most things regarding HOA financial statements, it depends on state laws and community bylaws. Generally, there are three places that they need to be turned in:

  1. The HOA Board of Directors – the board of directors should receive a full, unedited report. They will need all available financial details in order to make informed decisions and plans regarding community maintenance and future projects.
  2. Community Members – to foster an open and transparent relationship, homeowners should also receive copies of HOA financial statements. These statements, however, should be altered to exclude sensitive information such as delinquent accounts. There is a difference between being sensitive and being secretive. If it will not cause an issue between community members, it should be included in the documents sent to community members. All HOA financial statements should be available upon request.
  3. State Department – if a homeowner’s association is organized as non-profit, an annual report must be filed with the Secretary of State. Failure to do so could result in losing their “Good Standing” status. This may not be applicable to all HOAs.

The more accessible financial statements are, the better. Some community associations even opt to put their financial information on their website to allow homeowners to view it at any time. Of course, not all information needs to be publicly accessible, but everything that can be included should be included. Transparent financial processes help to promote teamwork and positive community relations between homeowners and association board members.

 

Who Should Prepare Financial Statements?

This answer depends on the size of the community. Smaller, self-managed associations may have an elected treasurer, financial officer, or president that is responsible for compiling financial documents. In such cases, it is a good idea to use a professional accountant to ensure that HOA financial statements are prepared correctly before releasing them to board and community members. Remember, just because someone was elected treasurer, does not necessarily mean they have accounting experience. It is always best to hire a professional. Large homeowner’s associations have more complex budgets and will usually have a management company, such as CSM, that handles all financial data.

If statements are self-prepared by an elected community member, make sure that there is a backup of all financial records. In the unfortunate event that something happens and the preparer is no longer able to maintain their responsibilities, it can be difficult for the next person to learn their accounting methods or sometimes even gain access to the records.

Whether an HOA is made up of ten units or ten thousand units, it could be beneficial to hire a management company to ensure that everything is being run as efficiently and effectively as possible. When looking into property management companies, it is important to look for a company with a strong financial background. If the finances are not well kept, the entire community association becomes ineffective. Hiring a company such as CSM to provide financial management assistance not only makes life easier for the board of directors but can also give community members peace of mind knowing that all finances are being managed accurately and efficiently.

 

The Importance of HOA Financial Statements

To make a great plan, it is important to have all the information possible. Reliable, consistent, and transparent financial statements not only help the HOA board of directors make well-informed decisions but also support community health by allowing all community residents and stakeholders to be a part of the team. Keeping members in the dark only promotes mistrust and working with inadequate or no financial information can lead to dwindling reserves for community upkeep and new projects.

Creating an effective HOA is as simple as choosing an accounting process that works for your team, keeping detailed records, and communicating openly and freely with the community about all financial information.

 

Tags: , ,
All of a Sudden Everyone Wants Me – Not to Mention My Money! by Steven J Weil, PhD, EA, LCAM

All of a Sudden Everyone Wants Me – Not to Mention My Money! by Steven J Weil, PhD, EA, LCAM

  • Posted: Aug 31, 2022
  • By:
  • Comments: Comments Off on All of a Sudden Everyone Wants Me – Not to Mention My Money! by Steven J Weil, PhD, EA, LCAM

All of a Sudden Everyone Wants Me – Not to Mention My Money!

by 

Accountant Fort Lauderdale

A whole new world has opened to me and I don’t like it one bit. As I recently turned 65, the nature of my mail, Facebook feed and email have changed. I have suddenly become the target of every financial planner, investment product, tax savings event, webinar and free meal on the planet.

All of these promotions want to help me solve my retirement issues, not that I had any to begin with but then again, I am just not ready to retire. They know the secret to not paying taxes on my IRAs and retirement plans, so I can live the good life, as long as I have at least $500,000 they can help me.

All this new information got me to thinking; as a tax guy that is a bit of a nerd and spends way too much time studying the tax code, tax strategies, retirement planning and wealth building, what could they possibly know that I missed? So lately I have been spending a lot of time at Webinars, Free Meals and speaking with many of these people whose sole goal in life is to help me. Here’s what I found, so that you won’t have to waste your time.

What I have found is that they do not have a magic way to make my retirement (if I ever do retire) worry free. When they say they can show me how to take money out of my IRA or pension tax free, what they really mean is that I can pay the tax using money I borrow from an insurance company. I “should” move my money, what I need to pay the tax, and that I will then owe the insurance company who will take payment from the death benefit — unless I choose to liquidate the policy, at which time I will have to pay back the insurance company with interest for borrowing my own money. These salespeople are long on ideas but short on details, in most cases, until I commit my money.

In the end most are nothing more than sales people looking to close a deal. Yes, they do care about retirement, but not my retirement. What they care about is theirs. Over the years I have had many clients come to me with asset protection plans that while they may have made it harder for others to sue and take their assets, required thousands of dollars in accounting and tax services, complicated accounting and money be set aside for legal defense should something happen, and they need this heavy-duty protection. In almost every case the cost outweighed the benefit.

This is not to say that you can’t do anything about the amount of taxes you pay in retirement. But this is the kind of planning that well informed tax pros have been using for years. This includes timing IRA and pension distributions into low tax rate years, planning for capital gains and capital losses, using tax favored investments, like municipal bonds, where appropriate and even the appropriate use of annuities when deferral and asset protection is required.

We are hearing a lot about tax changes from the White House and Congress. The proposals include tax increases for families with income over $400,000 (but what will really happen in the end no one knows). Be careful about making moves based on tax changes that are not yet known. Make sure you have the facts and you understand the consequences of any actions you take as well as how those advising you are compensated for what they are advising you.

In the over 30 years we have been helping clients, tax rates have gone up and down, and the tax laws have changed many time, but no matter what the changes we have been able to assist clients in charting a course that makes sense and helps them to do better.

Tags: ,
Need some help getting ready for for your tax planning meeting? We have developed the YEAR END TAX PLANNING GUIDE

Need some help getting ready for for your tax planning meeting? We have developed the YEAR END TAX PLANNING GUIDE

  • Posted: Dec 21, 2021
  • By:
  • Comments: Comments Off on Need some help getting ready for for your tax planning meeting? We have developed the YEAR END TAX PLANNING GUIDE

Need some help getting ready for for your tax planning meeting?

We have developed the YEAR END TAX PLANNING GUIDE, to help you uncover tax planning opportunities to

Download a copy of this important guide just click here.

Tags: ,

We were outsourced Accounting and Bookkeeping resource when no one knew what outsourcing was

We were outsourced Accounting and Bookkeeping resource when no one knew what outsourcing was

  • Posted: Oct 07, 2021
  • By:
  • Comments: Comments Off on We were outsourced Accounting and Bookkeeping resource when no one knew what outsourcing was

We were outsourced Accounting and Bookkeeping resource when no one knew what outsourcing was

Back in 1984 when we opened for business, our first clients turned over their bookkeeping and accounting to us to handle for them. In those days we sent information back and forth by fax and federal express: no one had heard of the internet and the only clouds we knew about were is the sky. But for Clients that could not keep their records in order, we were able to help them get out from under a bookkeeping mess and back to doing what they did best — building their business.
While our methods have changed (no more faxing and Federal Expressing), one thing has never changed; all work is done by our full-time employees that are based in our offices here in Florida. This allows us to be sure that our staff is always available to take your calls, answer your questions, and respond to inquiries from your customers and vendors.

RMS Accounting combines quality cost effective accounting and bookkeeping services with a team of tax accounting professionals to help clients make and save more money.

rms-accounting

Accounting and tax services are about more than just numbers on a page. Unlike other accounting firms, when you call us you will get a live human being not voicemail and unlike other accounting firms we will work with you on your business helping you to grow profits and cut taxes. Unlike other accounting firms we will tell you before we begin work exactly what it will cost for our help.

Our tax accounting professionals will be happy to assist you with; tax planning, tax preparation and tax representation.

Our tax accountants are EA’s (Enrolled to practice before the IRS). They know the tax laws and will make sure you don’t pay one penny more than you have to. Visit us for a free consultation with a tax accountant, who will review your tax situation, with you to determine the best course of action. The tax accountant will provide you with a free fee quotation.

Tags: ,
HOA Income Statements

HOA Income Statements

  • Posted: Mar 30, 2021
  • By:
  • Comments: Comments Off on HOA Income Statements

HOA Income Statements

Unlike a balance sheet which shows a quick snapshot of HOA finances at a certain point, the income statement shows financial information over a period of time. Usually, the period of time is the rate at which you prepare your financial documents whether it be monthly, quarterly, or annually.

The income statement is considered the most important document within the financial statement because it shows the financial direction, whether that be positive or negative, of the community association.

 

What Information Should Be Included

There are four items that should be included in an income statement:

  1. Gross profit
  2. Operational expenses
  3. Gains and losses unrelated to operational costs
  4. Net income

Gross profit is all the money that was made over the time period. If you submit financial documents monthly, it should be all the funds raised within that month. That should include any dues, fees, charges, or donations collected.

Operational expenses would be regular fees such as property maintenance, pool cleaning, landscaping, etc. Anything that is a recurring charge necessary to keep the community up and running.

All other one-time expenses would fall under the Gains and Losses category. Because the income statement shows finances over a certain period of time, any extra expenses need to be reported. If the community playground needed new mulch in March, that expense should appear in that month’s income statement, even if it means the association did not make as much money in March on paper.

Net income is the result of taking gross profit and subtracting all expenses for the period. This is the magic number that the entire report is based on. If your report comes out showing a positive net income, then your association did well and you can put some money in the reserves. If your net profit came out negative, then you should take a deeper look into your finances and see where improvements can be made.

 

Be as Detailed as Possible

All categories should be broken down to be as detailed as possible. For example, gross profit should be broken down between dues, fees, and any other source of income for that time period. Operational expenses should be broken down into landscaping, pool cleaning, etc. The more detail included in any financial document, the more insight it will give to the association board of directors leading to better decision making and financial planning.

 

Ask the Experts

If you are still unsure about how to create a proper income statement, contact the professionals at CSM. We have years of experience working with HOAs from around the United States. With a wide variety of services, our goal is to give community associations all the tools and technology they need to be financially successful, while at the same time still allowing them to remain independent.

Tags: , , ,
End of year Taxes for your property by RMS Accounting

End of year Taxes for your property by RMS Accounting

  • Posted: Jan 08, 2021
  • By:
  • Comments: Comments Off on End of year Taxes for your property by RMS Accounting

End of year Taxes for your property

by RMS Accounting

End of Year Taxes:

While tax returns aren’t due until April, to minimize your tax burden the strategy of accelerating rental property expenses should be considered now, property owners, should start deducting these expenses this year could be more important than ever, especially if you’re affected by the new Affordable Healthcare Act tax. Under the Act, if your modified adjusted income exceeds $250,000 (filing jointly) then you’ll pay an additional 3.8% tax on any rental income or other passive income above that amount. Rental property expenses are deductible only in the year they are paid, so December is your last chance to pay for any rental property-related expenses that you want to deduct this year. Additionally, you can pay your expenses in advance, so consider paying in December some expenses due next year (such as a mortgage payment, property taxes, or utility bills) to offset this year’s income.

As far as rental income is concerned, don’t be tempted to defer rental income for December rents to next year. The Internal Revenue Service matches 1099s for commercial leases, and they want to see rental income match up with 1099s. While residential rental owners don’t receive 1099s from their tenants, many audits that CAP’s have been involved in where the IRS examined residential lease agreements and had issues with the rental owner declaring less than a full twelve months of income if the unit was occupied for the entire year. But what if you were on vacation for all of December and didn’t check your mailbox until mid-January? That’s still income for December.

It’s important to not make assumptions about rental income losses–several clients get burned because they thought they could deduct these losses. The problem is that rental income losses fall under the “passive income rule” which can be a complicated beast. Rental income is considered passive income, and under the rule, passive income losses can only be offset against passive income, which means you need to have another rental property that makes money or some other passive income source. The rule is different if your adjusted gross income is less than $150,000. The passive income rules are very complex and everyone has a different situation, so it’s critical that you consult with your tax advisor before you act on any assumptions.

 

Checklist: End of Year Taxes

 

Meet with your accountant to discuss end of year tax strategies.
Consider paying now expenses due next year to offset this year’s income.
Let your accountant know if you anticipate any rental losses next year, or if you’re planning on refinancing, buying, or selling rental property as these activities may have tax consequences that might be partially mitigated with informed planning.
If you formed an LLC or S-Corporation to hold your rental property, order 1099s now to send to your unincorporated vendors (to whom you paid more than $600) by January 31st–it can sneak up quickly.

We provide you with complete, timely reports that will manage your cash flow:

  • Accounts receivable aging
  • Transaction Journals
  • Cash disbursement listings
  • Bank reconciliations
  • Accounts payable reports
  • Sales tax reports
  • Cash demand projection
  • Payroll tax reports
  • Cash balance reports
  • Other business tax reports
  • Balance sheets
  • General ledgers
  • Income statements
  • Customized reports

You will be surprised at how much you can save. You can reduce many variable costs, office space, payroll taxes, employee benefits, equipment costs, software costs and the effort! Contact us for a free estimate of the cost savings for your business.

Year-end reviews:

Revisiting and evaluating insurance policies and rental regulations and laws is key to protecting your rental property investment. We recommend that rental property owners set an annual calendar reminder to review their insurance policies for proper and adequate coverage and check on new local ordinances affecting landlords.

Insurance policies and their respective coverage amounts change frequently. We have seen many owners move out of their property and convert it to a rental but forget to call their insurance provider to make sure their policy is updated from a primary occupant policy to a landlord policy. If an owner does not make this policy change then it is very likely a future claim will be denied for the wrong policy classification. The classification change to a landlord policy will likely result in a premium increase but without the proper classification the property owner is not adequately insured which, in the end, will be a much bigger price to pay.

City ordinances can change quickly and are difficult for distant and even local landlords to be aware of. While a local professional property manager should be able to help you with local ordinances, It is ultimately the property owner’s responsibility to make sure rental property is compliant with local city and county ordinances.

In addition to local ordinances, make sure you understand federal and state laws that impact rental property, such as fair housing requirements and your state’s landlord-tenants laws. Your property manager, if you have one, will be an important resource here. If you self-manage your rental property, consider joining a state or local landlord association, as these groups often have attorneys provide updates on changing laws as well as provide other benefits. Property Managers in South Florida can join forces with www.sfpma.com

While it might be a slower time for year for landlords and property management companies, the winter, especially December, can nonetheless get busy because of the holidays. However, it’s important to have a game plan for the coming year. Schedule a planning meeting to meet with key people, including any co-owners of your rental property or your property manager, if you have one, to address these issues:

 

Checklist: Planning for Next Year
Confirm annual or six-month rental property inspections are scheduled.
Review lease agreement template.
Review policies or “house rules.” Consider adding a policy addressing space heater safety. Adding a Pet Policy, we see many more tenants and owners with pets, along with service animals.
Review rents and consider an increase.
Discuss whether any significant repairs, such as re-roofing, need to be undertaken in the coming year.

 

Tags: , , ,