Common Compliance Findings in IRS Form 8823 Compliance Continuum
Tina Clary provides insights into ten common compliance findings related to IRS Form 8823, focusing on issues such as VAWA policies, incorrect forms, targeted set-asides, and more. State findings that may not necessarily lead to 8823 violations are highlighted, with recommendations for addressing each issue effectively.
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IRS Form 8823 & Ten Common Findings Spectrum Compliance Continuum 2022 By: Tina Clary
Issue #10 Violence Against Women Act (VAWA) VAWA All property types must have VAWA polices and procedures in place. Tenants must sign VAWA lease addendums. IRS has remained silent on form types to be used, MaineHousing recommends using the HUD forms. This would be considered a State finding, not a 8823 violation
Issue #9 Incorrect Forms Not the most recent Tenant Income Certification (TIC) 1/28/2020 Both the tenant income certification and selfcertification forms revision dates are above. The most recent version can be found on MaineHousing.org This would be considered a State finding, not a 8823 violation
Issue #8 Targeted Set-Asides Set Asides Each property has its own income/rent designations that can be found in the Extended Use Agreement (EUA) Owner/Agents should occasionally review the current tenant designations to ensure compliance with the EUA Example: Property must have 10 units at 50% Area Median Income (AMI) and 10 units at 60% AMI This would be considered a State finding, not a 8823 violation
Issue #7 Incorrect Rent & Income Charts Using incorrect income/rent charts If the property was placed in service prior to January 1, 2009 use the HERA charts if applicable to your area If placed in service after January 1, 2009 use the straight AMI charts Maximum income and rent on the TIC MaineHousing has noted that incorrect amounts have been recorded in all the following areas: Move-in income 140% at Annual Recertification 80% if FedHome funds apply This would be considered a State finding and could rise to the level of a 8823 violation
Issue #6 Next Available Unit Rule Over income triggers: 140% LIHTC 80% FedHome 30% Housing Trust Fund (HTF) When this occurs the tenant file needs to be documented for the next available unit rule acknowledging household over income and management monitoring for program compliance This would be considered a State finding and could rise to the level of a 8823 violation
Issue #5 Wet Signatures Wet Signatures (MSHA notice 2020-05 & 2022-08) Applications, move-ins or re-certifications for tenants, MaineHousing will allow electronic signatures as long as they obtain original wet signatures on the following documents at a later date: Application Tenant Income Certification Form (TIC) Release of Information Form Lease and all Lease Addenda (including lease amendments) Affidavits of unemployment Zero Income Forms This would be considered a State finding and not a 8823 violation
Issue #4 Tenant Charges Fees (8823 Guide Chapter 11 category 11g, page 11-1) Application processing fees Fees may be charged for actual cost. State agency will request backup documentation Charges for amenities included in basis Examples are washer/dryer hookup fees Built in/on site storage sheds The above examples would always be included within the gross rent 8823 violation
Issue #3 Missing Applications Missing applications (8823 Guide Chapter 4 category 11a, page 4-30) Files must contain the following: Application/Income and Asset Questionnaire Verification of income and assets Student status Tenant Income Certification (TIC) The above documents must be maintained in the tenant file throughout tenancy. This information would also need to be put into any grandfathered tenant files at re-syndication 8823 violation
Issue #2 Income Recertifications Recertification's not completed within 12 months of the last certification (8823 Guide Chapter 5 category 11b, page 5-1) This is a straight Tax Credit project with no other funding sources A property containing rent restricted units and market units 3rdparty recertification must be completed annually A property containing 100% rent restricted units (ex: 60% AMI) income certification are done at move-in. Annually thereafter, only student status needs to be verified A property containing 100% rent restricted with different layering (ex: 50% & 60% AMI or lower) 3rdparty at move-in for all units. For 60% units the example above would apply. Lower targeting would need to obtain 3rdparty verification every 6thyear from the PIS date. (MSHA notice 2018-01)
Issue #2 Continued A property containing Rural Development, HUD and/or Public and Indian Housing or 811 would follow program recertification guidelines A property containing funding with Home or HTF, must 3rdparty certify at move-in and every 6thyear from the PIS date 8823 violation
Issue #1 Utility Allowances Utility Allowances (UA s) Non- Subsidized units UA s not implemented within 90 days after the change. The 90 day implementation period begins when the agency makes revised UA s available (8823 Guide Chapter 18 category 11m, page 18-7) Properties that placed in service (PIS) on or after 8/23/2013 must use the Allocating Agencies utility allowance charts. Prior to 8/23/2013 they can choose to use one of the local Public Housing Authority (PHA) charts. (MaineHousing notice 2020- 01 issued 1/14/2020) Utility Allowances- Subsidized Units Must follow subsidy type rules (Rural Development, HUD or Public and Indian Housing) 8823 violation
Things to remember Any corrections made to a tenant file prior to notification of a State Agency compliance review that would have resulted in a 8823 will NOT have an 8823 issued If correction made after notification and it is an 8823 issue, the finding will still result in an 8823 MaineHousing will be reviewing Tenant rent rolls for approved rents either through the budget process or a separate request
