Money, Money, Money Working with Accountants

From attorneys to contractors, every building and HOA has a list of various professionals to work with to keep things running smoothly. One of the most important of these professionals is the building’s accountant. One wrong calculation or missing component in a community’s finances can lead to angry residents, cash flow problems, even lawsuits. As a manager, it’s important to know how to find a competent person to crunch those numbers, what expectations you can hold for him or her, and how to get the most of your relationship.

Why Have An Accountant?

The short answer? Because it’s legally required. Audits are used to compose tax and budget statements that are sent to shareholders and unit owners so that they know where their money is going. In the case of co-op communities, accountants file corporate tax returns on behalf of the cooperative corporation, and condo associations typically file their own returns as well..

"Most association governing documents require an annual audit,” says Edward Guttenplan of Wilkin & Guttenplan P.C. in East Brunswick. “Mortgage lenders also generally expect an association to have one. For the purposes of the audit, associations should always have an outside accountant who brings independence and enhanced assurance to the reliability of the information. The right professional also brings with them considerable knowledge about the industry, trends and best practices. Of course, the downside is that there’s a cost to having an outside accounting firm involved."

According to Karen Sackstein, a CPA based in Fair Lawn, smaller buildings sometimes do their own numbers. For example, a 10-unit condo can usually handle its own finances—particularly if one of the volunteers on the board has expertise in finance. With a bigger community however, keeping the books in-house is impractical, and can lead to more problems than it solves if irregularities arise.

Sackstein adds that most New Jersey condominium communities are organized as non-profit corporations, “under NJ Title Section 15A.” Even if your association has not generated any income and owes no money to the IRS, it’s required to file a federal tax form each year. And though a great many condominium associations are run as not-for-profit entities, associations are considered corporations from the viewpoint of the IRS.

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Comments

  • I sold a rental coninmdoium at a lost, I owned over 2 years. I sold it this year, I am planing to sell another rental property that I own for over 20 years and I will have a capital gain, my question is, can I substract the loss of one from the gain of the other at the end of the year when I do my taxes?thanks for your responseAlbert