We study the effects of phase-frustrated, higher-order interactions in a system of coupled phase oscillators with two communities. We use dimensionality reduction techniques to derive a lowdimensional system of ODEs to describe the macroscopic behavior of the system. By analyzing this system we show that, in addition to the fixed point solutions present in a system of oscillators with higher order interactions and community structure only, the system also exhibits oscillatory or chaotic synchronization behavior for some phase lag values. Moreover, some phase lag values give rise to multistability of solutions, where both fixed point solutions and oscillatory or chaotic behavior of the order parameters can be observed, depending on initial conditions.