Closing the Investment Club s Books by ICLUBcentral Inc

Closing the Investment Club’s Books by ICLUBcentral Inc. http: //www. iclub. com (See speaker notes for additional information. )

Who Needs to File Taxes? • All investment clubs must file a federal tax return. – If you were in operation during any part of the year, you must file with the IRS. – If your club disbands, you must file with the IRS. – Even if your club has no gains, purchases, sales, income, and/or expenses for the year, you must file with the IRS. • Many states also require clubs to file. 2

When Should I Prepare Tax Filings? • Wait for all necessary data from bank & broker. • Banks & brokers have until January 31 to deliver year-end 1099 statements. – You may need to wait until February before closing books. – You must provide partners with Form 1065 & Schedule K-1 by April 15. – You must complete and remit your tax filings to IRS before April 15. 3

Prepare to Close Your Books • Check your program allocation settings: – Should use “Time-based” allocations. – Do not distribute units. • Check your security settings: – Mark all stocks as stocks, mutual funds as mutual funds, REITs as REITs, etc. • Share year-end/tax process with members, so they know what to expect: – http: //www. iclub. com/support/tax_season. asp 4

Close the Books • Ensure all transactions up to and including 12/31 are entered. – Do NOT enter withdrawals or other transactions on 12/31. • Create a new valuation for 12/31. – Do NOT use Valuation Statement from December meeting to close books. 5

Close the Books (continued) • Allocate income and expenses for 12/31. • Print reports: – Allocation of Income & Expenses Report for January 1 to December 31. – Income & Expense Statement & Balance Sheet for same period. – Make sure all members have access to these reports. 6

Audit the Books • Convene Audit Committee of club members. • Committee then meets to verify entries in books from broker & bank statements. • Treasurer provides to committee: • Complete Journal and other reports for year. • All bank & brokerage statements. • All 1099 forms received. 7

Treasurer-Provided Audit Reports • For the full year: – – Complete Journal/Ledger Cash Journal Cash Contributions Report Transactions Summary • Put checkmark in box “Subtotal Tax. Distrib's” – Individual Investment History • For each stock owned during period – Individual Valuation Units Ledger • For each member – End-of-period Valuation Statement 8

Other Required Information • • All broker statements All trade confirmations. All bank statements. All deposit slips, if available. All cancelled checks. All Dividend Reinvestment Plan statements. All 1099 -DIV and 1099 -INT statements. All stock certificates in possession of club. 9

Audit Committee Tasks • Check bank & broker balances to verify every entry matches club's books, including dates. • Verify that club's books show same number of shares and dividends for each stock as broker and DRP statements. • Cross-check register, bank statement, and club books. • Verify beginning and ending balances for all accounts and Valuation Statement. • Complete Annual Verification Report. 10

How Do I Prepare Tax Forms? • Use ICLUBcentral’s Club Tax Printer software! – Federal Club Tax Printer. – State Club Tax Printer (for 13 states, as of 2007). • Order online at www. iclub. com or by calling 617 -661 -2582. 11

Tax Printer Software • For Club Accounting 3: – Available by download or on CD-ROM. • For Club Accounting Online at myiclub. com: – No CD or download necessary; click Taxes tab on club web site. • Price: $89. 99 ($59. 99 for Stock. Central members). 12

When Is Tax Printer Available? • IRS approves new forms each year. • You 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. 13

Using the Club Tax Printer • Open/Start Club Tax Printer software. • Use Q&A format to print out: – Form 1065. – Schedule K-1. • Send one Form 1065 to IRS via Registered Mail; keep one for club records. • Print 3 copies of each Schedule K-1: – – – Send one copy of each Schedule K-1 to IRS. Keep one copy of each for club. Give third to appropriate partner. 14

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Federal Tax Information • • 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-1. 24

Filing with the IRS • Use Form 1065 / Schedule K-1. • Obtain latest version for tax year. • Verify all member SSN’s & Club Tax I. D. • Keep a duplicate for club records. • Prepare 3 copies of Schedule K-1 for each member. – – – One copy of each to IRS. One to each member. One of each for club records. 25

Where Do I File? Investment clubs do not send forms to same place as individuals. • If your club is based in: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Florida, Georgia, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Utah, Washington, Wyoming: – Send return to: Internal Revenue Service; Ogden, UT 84201 -0011 • If your club is based in: Connecticut, Delaware, District of Columbia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia, West Virginia, Wisconsin: – Send your return to: Internal Revenue Service; Cincinnati, OH 459990011 26

Where Do I Get Tax Help? • BI Investment Club Accounting Handbook. • Local Chapter contacts. • Club Treasurers Discussion List: – http: //lists. better-investing. org • BI Wiki: – http: //biwiki. editme. com/ • Stock. Central “Clubhouse” Forum: – http: //www. stockcentral. com/ 27

Where to Get Software Help • Software Manuals: – http: //www. iclub. com/support/downloads. asp • ICLUBcentral Technical Support: – http: //www. iclub. com/support • Treasurers List: – http: //lists. betterinvesting. org • BI Wiki: – http: //biwiki. editme. com/ • Local Chapter contacts: – http: //www. betterinvesting. org • Stock. Central “Clubhouse” Forum: – http: //www. stockcentral. com/ 28

Technical Support • ICLUBcentral’s Technical Support primarily handles product-related questions. • Must have: – A licensed Club Accounting product. – An active Club Accounting Maintenance Agreement. 29

Technical Support • Web-based Support – www. iclub. com/support • Telephone Support – – – 617 -661 -2582 9: 30 AM to 6: 00 PM Eastern Time Monday through Friday • Renew your Club Accounting Maintenance Subscription: – Call ICLUBcentral at 1 -617 -661 -2582 30

Thank You! Any Questions?