Preparing Investment Club Taxes By Doug Gerlach ... Investment Club Taxes By Doug Gerlach, ICLUBcentral Inc. 2 Facts About Filing Partnership Tax Returns 5 All investment clubs must

Preparing Investment Club TaxesBy Doug Gerlach, ICLUBcentral Inc.

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Doug Gerlach

ICLUBcentral Inc.www.iclub.com

You don’t need microphone. If sound or graphics are “choppy”: ◦ Turn off all unnecessary programs.◦ Don’t connect wirelessly.◦ Or listen using telephone.

For problems, contact GoToWebinar:◦ 1-800-263-6317◦ http://www.gotowebinar.com

Use Questionsbox in GoToWebinarapplet to type questions.

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Go to www.betterinvesting.org/events/

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Facts About Filing Partnership Tax Returns

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All investment clubs must file Federal tax return.◦ If club was in operation during any part of year, you

must file with IRS.◦ If club disbands, you must file with IRS.◦ Even if club has no gains, purchases, sales, income,

and/or expenses for year, you must file with IRS.◦ There are no exceptions.

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Many states require clubs to file. Some states require clubs to file if any

partner is resident in that state:◦ Regardless of whether or not club is officially

located there!

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Massachusetts: Must file online IF:◦ Partnership has 25 or more partners, OR◦ Partnership has more than $50,000 in gross income , OR◦ Partnership has more than $100,000 in gross stock sale

proceeds. New Jersey: Must file online IF:◦ Partnership has 10 or more members. Club State Tax Printer will prepare return which you can

transcribe to web site.

Wisconsin: Must file online UNLESS:◦ Waiver to file on paper is requested from state &

approved prior to filing of return.

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ICLUBcentral Club Tax Printers now support large clubs in California (with assets greater than $600,000 & receipts greater than $250,000) for 2014 tax year & going forward.

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Q: When do taxes need to be filed? When does “partnership information” need to be sent to members?

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Q: When do taxes need to be filed? When does “partnership information” need to be sent to members?

A: According to IRS:◦ Cannot file prior to January 30, 2015.◦ Must provide partners with Form 1065 &

Schedule K-1 by April 15, 2015.◦ Must remit tax filings to IRS before April

15, 2015.

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Wait for necessary data from bank & broker. Banks & brokers have until February 17,

2015 to deliver year-end 1099 statements.◦ You must wait until February before closing books.

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Use ICLUBcentral’s Club Tax Printer software.◦ Federal Club Tax Printer module.◦ State Club Tax Printer module for 14 states.

Available for Club Accounting 3 or myICLUB.com.

Order online at www.iclub.com or by calling 877-33-ICLUB.

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For Club Accounting 3:◦ Available by download or on CD-ROM.

For myICLUB.com:◦ Available on club web site.

ICLUBcentral’s investment club tax preparation software is approved by tax agencies in all states offered!

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IRS releases new forms each year. Can NOT use prior year software for current

year.◦ Final forms released by IRS as early as November, as

late as February.◦ Initial release of ICLUBcentral software typically uses

DRAFT forms.◦ Programs are auto-updated when FINAL forms are

available. ICLUBcentral Club Tax Printer for IRS and all

states released as of February 20, 2015.

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Revised “interview” wizard now on single page (myICLUB) & saves answers from session to session.

Capital Gains worksheet now saves data reported on Form 8949 from session to session.

Family clubs can now calculate constructive ownerships percentages & complete schedule B-1.

Large clubs now supported with additional required schedules (M).

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Getting Ready

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Make sure to complete “Closing Books” tasks.◦ See December 2014 Club Webinar to review:

http://www.betterinvesting.org/events/ (in Webinar Archives).

Make sure you have all 1099s from financial institutions.◦ Check broker website if you didn’t receive in mail.

Make sure address on file with IRS is current.◦ If “official” address is different from that used on tax

forms, submit Form 8822-B BEFORE submitting return.

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Q: If ex-date for a dividend is Dec 2014 but the pay date is Jan 2, 2015 what year are taxes paid? How is that recorded in the accounting software?

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Q: If ex-date for a dividend is Dec 2014 but the pay date is Jan 2, 2015 what year are taxes paid? How is that recorded in the accounting software?

A: Enter transaction on 12/30/2014 & include actual date in note. This way it will be included in 2014 tax return.

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Q: Our club owned PSEC & 1099 shows that dividends were both qualified and non-qualified, though Dividend Report shows all as being non-qualified.

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Q: Our club owned PSEC & 1099 shows that dividends were both qualified and non-qualified, though Dividend Report shows all as being non-qualified.

A: PSEC is Business Development Company (BDC), not a common stock.◦ Set as “Stock - Other” in software.◦ If 1099 includes return of capital, interest, or short/long-term capital gains, re-edit all distribution entris to reflect percentage of each as on 1099.◦Allocation will ask for Qualifying Dividend total.◦We recommend clubs not hold REITs, BDC, Trusts, MLPs, or other Partnerships.

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Q: Is there any special way that a club has to handle an ETF?

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Q: Is there any special way that a club has to handle an ETF?

A: Yes. Make sure ETF is classified as “Stock -

Other” in Settings. At year-end, adjust each quarterly

distribution in club accounting program to reflect distribution percentages as reported on 1099.

Note: ETFs that invest directly in commodities are not supported. Contact ICLUBcentral Customer Support.

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Brokerage-Reported Tax Basis on Sold Securities

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Brokerage firms must track cost basis of all securities & report basis of all sold securities to IRS on Form 1099-B.

Individuals & partnerships must now report cost basis of sold securities on Form 8949.

Must also disclose if amounts reported:◦ Match what brokerage reports.◦ Don’t match what brokerage reports.◦ Aren’t reported by brokerage.

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If capital gains or cost basis reported to IRS by brokerage firm is incorrect, don’t worry.

IRS expects that brokerage firms may not have records for all securities held.

Form 8949 will reconcile differences, & you will not suffer any consequence assuming your records are correct.

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Preparing Federal Tax Return

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Be sure all transactions are entered & reconciled.

Open/Start Club Tax Printer software. Use Q&A format to generate & print out:◦ Form 1065 & related schedules.◦ Schedule K-1.

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If your club has family members, complete Constructive Ownership worksheet.

IRS wants to know if any member’s ownership is 50% or more including indirect family ownership.◦ “Family” includes spouse, lineal descendant or

ancestor, sibling.◦ Does not include aunts/uncles, nephews/nieces, in-

laws. If any members qualify, Schedule B-1 will be

completed for you.

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Submitting Return & Distributing to Partners

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Form 1065 & Schedules K & D:◦ Send one to IRS via Registered Mail, return-receipt

requested.◦ Keep one for club records (PDF and/or printed).

Schedule K-1:◦ Send one copy of each Schedule K-1 to IRS.◦ Keep one copy of each for club.◦ Give one copy to appropriate partner WITH CODE SHEET: By giving printed copy. By sending PDF. By providing instructions for each member to download their

own K-1 from myICLUB.com◦ Also provide Schedule K-1 page 2 (listing of codes

used).

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Investment clubs do not send forms to same place as individuals

Address will be provided with forms. Address is usually just state & zip code –

that’s OK!

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On myICLUB.com, no need to print K-1s for members.

Each member logs in to club web site & clicks Taxes tab.

Each member can then download his/her information ONLY!

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Preparing State Tax Returns

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State Tax Returns follow similar Q&A process as Federal return.

Prepare Federal return first & make sure it’s final, then prepare State return.

Remember: You may need to file in more than one state if members reside in other states.

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For Disbanding Clubs

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Club that decides to disband in December will not likely be able to complete process in time to avoid filing return in next year.

Disbanding clubs can use prior-year software to generate “short-year” final return.

If current year IRS forms are available by filing deadline, cannot use prior year forms.

• See: http://www.iclub.com/support/CA3support.asp#disband

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Q: Our club disbanded on December 26, 2014. Do we need to file a final tax return in addition to filing our 2014 Federal and State return?

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Q: Our club disbanded on December 26, 2014. Do we need to file a final tax return in addition to 2014 Federal & State returns?

A: No – as long as all financial accounts have zero balance. The Tax Printer asks if a return is the club’s Final Return – check that box to notify IRS. This checks the “Final Return” box on page 1 of Form 1065.

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Getting Help

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Local Chapter contacts. Club Treasurers Discussion List:◦ http://www.betterinvesting.org

BI Wiki:◦ http://biwiki.editme.com/

StockCentral “Clubhouse” Forum:◦ http://www.stockcentral.com/

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1-800-TAX-FORM (1-800-829-3676). IRS Publications (www.irs.gov).◦ IRS Publication 541 (Partnerships). ◦ IRS Publication 550 (Investment Income & Expense).

IRS instructions for Tax Forms .◦ Federal form 1065 (Partnership Tax Return).◦ Form 1065 - Schedule D.◦ Form 1065 - Schedule K.◦ Form 1065 - Schedule K-1.

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Frequently Asked Questions (FAQ) tool:◦ www.iclub.com/faq/◦ Easiest & fastest way to get help!

Software Manuals:◦ www.iclub.com/support/downloads.asp

ICLUBcentral Technical Support:◦ www.iclub.com/support

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Web-based Support◦ www.iclub.com/support

Telephone Support ◦ 877-33-ICLUB◦ 9:30 AM to 6:00 PM Eastern Time◦ Monday through Friday

Renew your Club Accounting Maintenance or myiclub.com subscription:◦ Call ICLUBcentral at 1-877-33-ICLUB◦ Visit www.iclub.com/store/

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ICLUBcentral Inc.www.iclub.com

Write me:[email protected]

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Documents

Preparing Investment Club Taxes By Doug Gerlach ... Investment Club Taxes By Doug Gerlach, ICLUBcentral Inc. 2 Facts About Filing Partnership Tax Returns 5 All investment clubs must