Changes Affecting Your Club for 2018 Tax Reporting
Laurie Frederiksen on
Hi all,
Now that 2017 tax season has been put to bed, it is time for your club to focus on one of the changes which you will be dealing with when it comes time to prepare your 2018 taxes next year.
Starting with your 2018 tax reporting, IRS partnership audit rules have changed.
If the IRS selects to audit your club tax returns, they are only going to have discussions and negotiations with a single person in your club. They will be called a partnership representative and you will need to identify them when you prepare your club taxes next year.
If they find any deficiencies, the club and all current members will be assessed for any and all back taxes and penalties that are owed, even if the audit was of a past year return.
This is a big change from the way things have worked in the past.
The IRS had been required to determine each partner's share of the adjustments made to partnership audit problem items and then compute a separate adjustment for each partner to assess the correct tax due as a result of a partnership audit.
They then had to collect individually from each partner. Now they will be collecting from the club itself.
You will have the option to "opt out" of this process, in which case the IRS would have to audit each member of the club individually and assess taxes and penalties owed at the partner level. However, there are restrictions on opting out.
The one that will probably affect the most clubs is that you can't have a Trust as a member of your club and opt out.
This all sounds scary and confusing as many tax things do, but if you follow the guidelines we provide to keep your club records and do your taxes accurately there is a very good chance that if you were audited by the IRS, there wouldn't be anything to find. If you are comfortable you are doing that and that your club has done it in the past, it doesn't matter what procedure the IRS uses to audit your club.
Here is an article from Forbes that does a pretty good job providing some further details about the new requirements:
You'll want to be discussing this change in your club meetings.
You'll need to determine if you want to opt out and whether you can opt out.
If you will not be opting out, you'll need to determine who you will be designating as your partnership representative. You may also want to discuss whether you want to modify your partnership agreement to clarify the process you'd expect them to follow if they did have to undertake negotiations with the IRS on behalf of your club.
Laurie Frederiksen Invest with your friends! www.bivio.com
This makes no sense how it would apply to stock clubs. It's my
understanding that clubs do not pay taxes. It's the members that pay taxes
due on any profits they took during the year. The club has no capability
of insuring that each member accounts properly on his tax return for any profits
taken . How can the IRS hold the club responsible...... assuming that the
clubs books are in order?
Am I missing something or interpreting this incorrectly?
Subject: [club_cafe] Changes Affecting Your Club for 2018 Tax
Reporting
Hi
all,
Now
that 2017 tax season has been put to bed, it is time for your club
to focus on one of the changes which you will be dealing with when
it comes time to prepare your 2018 taxes next year.
Starting with your 2018
tax reporting, IRS partnership audit rules have changed.
If the IRS
selects to audit your club tax returns, they are only going to
have discussions and negotiations with a single person in your
club. They will be called a partnership representative
and you will need to identify them when you prepare your club taxes
next year.
If they find
any deficiencies, the club and all current members will be
assessed for any and all back taxes and penalties that are
owed, even if the audit was of a past year
return.
This is a
big change from the way things have worked in the past.
The IRS had
been required to determine each partner's share of the adjustments
made to partnership audit problem items and then compute a separate
adjustment for each partner to assess the correct tax due as a
result of a partnership audit.
They then
had to collect individually from each partner. Now they will
be collecting from the club itself.
You will
have the option to "opt out" of this process, in which case the IRS
would have to audit each member of the club individually and assess
taxes and penalties owed at the partner level. However, there
are restrictions on opting out.
The one that
will probably affect the most clubs is that you can't have a Trust
as a member of your club and opt out.
This all
sounds scary and confusing as many tax things do, but if
you follow the guidelines we provide to keep your club records and
do your taxes accurately there is a very good chance that if you
were audited by the IRS, there wouldn't be anything to
find. If you are comfortable you are doing that and that your
club has done it in the past, it doesn't matter what procedure
the IRS uses to audit your club.
Here is an
article from Forbes that does a pretty good job providing some
further details about the new requirements:
You'll want
to be discussing this change in your club meetings.
You'll need
to determine if you want to opt out and whether you can opt
out.
If you will
not be opting out, you'll need to determine who you will be
designating as your partnership representative. You may also
want to discuss whether you want to modify your partnership
agreement to clarify the process you'd expect them to follow if they
did have to undertake negotiations with the IRS on behalf of your
club.
Laurie
Frederiksen Invest with your friends! www.bivio.com
@Dick Lewis: Clubs do not normally pay taxes but they could make mistakes or commit fraud in the reporting of partnership income and the allocation thereof. Normally, the clubs are partnerships and report income and the allocation of that income to the partners to the IRS and state taxing authorities. If there is some egregious error in such reporting, the partnership will be responsible for fines, etc. I do not know enough of the tax law to know whether there might be cases where the partnership might be responsible for individual partner tax errors, especially if the problem arose because of improper partnership reporting.
This makes no sense how it would apply to stock clubs. It's my
understanding that clubs do not pay taxes. It's the members that pay taxes
due on any profits they took during the year. The club has no capability
of insuring that each member accounts properly on his tax return for any profits
taken . How can the IRS hold the club responsible...... assuming that the
clubs books are in order?
Am I missing something or interpreting this incorrectly?
Subject: [club_cafe] Changes Affecting Your Club for 2018 Tax
Reporting
Hi
all,
Now
that 2017 tax season has been put to bed, it is time for your club
to focus on one of the changes which you will be dealing with when
it comes time to prepare your 2018 taxes next year.
Starting with your 2018
tax reporting, IRS partnership audit rules have changed.
If the IRS
selects to audit your club tax returns, they are only going to
have discussions and negotiations with a single person in your
club. They will be called a partnership representative
and you will need to identify them when you prepare your club taxes
next year.
If they find
any deficiencies, the club and all current members will be
assessed for any and all back taxes and penalties that are
owed, even if the audit was of a past year
return.
This is a
big change from the way things have worked in the past.
The IRS had
been required to determine each partner's share of the adjustments
made to partnership audit problem items and then compute a separate
adjustment for each partner to assess the correct tax due as a
result of a partnership audit.
They then
had to collect individually from each partner. Now they will
be collecting from the club itself.
You will
have the option to "opt out" of this process, in which case the IRS
would have to audit each member of the club individually and assess
taxes and penalties owed at the partner level. However, there
are restrictions on opting out.
The one that
will probably affect the most clubs is that you can't have a Trust
as a member of your club and opt out.
This all
sounds scary and confusing as many tax things do, but if
you follow the guidelines we provide to keep your club records and
do your taxes accurately there is a very good chance that if you
were audited by the IRS, there wouldn't be anything to
find. If you are comfortable you are doing that and that your
club has done it in the past, it doesn't matter what procedure
the IRS uses to audit your club.
Here is an
article from Forbes that does a pretty good job providing some
further details about the new requirements:
You'll want
to be discussing this change in your club meetings.
You'll need
to determine if you want to opt out and whether you can opt
out.
If you will
not be opting out, you'll need to determine who you will be
designating as your partnership representative. You may also
want to discuss whether you want to modify your partnership
agreement to clarify the process you'd expect them to follow if they
did have to undertake negotiations with the IRS on behalf of your
club.
Laurie
Frederiksen Invest with your friends! www.bivio.com
This is a big change. If there is a mistake on the partnership return, the partnership will be held responsible for paying the tax on the income that was not correctly reported. You are right that it did not work that way in the past but it will going forward.
The partnership will not be responsible for paying tax if individual members do not report their share correctly. It will be assessed on the amounts the partnership should have told members to report but didn't.
This was changed because it was so complicated for the IRS to assess and collect taxes and penalties owed under the old system that they did not feel they were able to do a sufficient number of audits.
Laurie Frederiksen Invest with your friends! www.bivio.com
@Dick Lewis: Clubs do not normally pay taxes but they could make mistakes or commit fraud in the reporting of partnership income and the allocation thereof. Normally, the clubs are partnerships and report income and the allocation of that income to the partners to the IRS and state taxing authorities. If there is some egregious error in such reporting, the partnership will be responsible for fines, etc. I do not know enough of the tax law to know whether there might be cases where the partnership might be responsible for individual partner tax errors, especially if the problem arose because of improper partnership reporting.
This makes no sense how it would apply to stock clubs. It's my
understanding that clubs do not pay taxes. It's the members that pay taxes
due on any profits they took during the year. The club has no capability
of insuring that each member accounts properly on his tax return for any profits
taken . How can the IRS hold the club responsible...... assuming that the
clubs books are in order?
Am I missing something or interpreting this incorrectly?
Subject: [club_cafe] Changes Affecting Your Club for 2018 Tax
Reporting
Hi
all,
Now
that 2017 tax season has been put to bed, it is time for your club
to focus on one of the changes which you will be dealing with when
it comes time to prepare your 2018 taxes next year.
Starting with your 2018
tax reporting, IRS partnership audit rules have changed.
If the IRS
selects to audit your club tax returns, they are only going to
have discussions and negotiations with a single person in your
club. They will be called a partnership representative
and you will need to identify them when you prepare your club taxes
next year.
If they find
any deficiencies, the club and all current members will be
assessed for any and all back taxes and penalties that are
owed, even if the audit was of a past year
return.
This is a
big change from the way things have worked in the past.
The IRS had
been required to determine each partner's share of the adjustments
made to partnership audit problem items and then compute a separate
adjustment for each partner to assess the correct tax due as a
result of a partnership audit.
They then
had to collect individually from each partner. Now they will
be collecting from the club itself.
You will
have the option to "opt out" of this process, in which case the IRS
would have to audit each member of the club individually and assess
taxes and penalties owed at the partner level. However, there
are restrictions on opting out.
The one that
will probably affect the most clubs is that you can't have a Trust
as a member of your club and opt out.
This all
sounds scary and confusing as many tax things do, but if
you follow the guidelines we provide to keep your club records and
do your taxes accurately there is a very good chance that if you
were audited by the IRS, there wouldn't be anything to
find. If you are comfortable you are doing that and that your
club has done it in the past, it doesn't matter what procedure
the IRS uses to audit your club.
Here is an
article from Forbes that does a pretty good job providing some
further details about the new requirements:
You'll want
to be discussing this change in your club meetings.
You'll need
to determine if you want to opt out and whether you can opt
out.
If you will
not be opting out, you'll need to determine who you will be
designating as your partnership representative. You may also
want to discuss whether you want to modify your partnership
agreement to clarify the process you'd expect them to follow if they
did have to undertake negotiations with the IRS on behalf of your
club.
Laurie
Frederiksen Invest with your friends! www.bivio.com
Subject: Re: [club_cafe] Changes Affecting Your Club for 2018 Tax
Reporting
This
is a big change. If there is a mistake on the partnership
return, the partnership will be held responsible for paying
the tax on the income that was not correctly reported. You are
right that it did not work that way in the past but it will going
forward.
The
partnership will not be responsible for paying tax if individual
members do not report their share correctly. It will be
assessed on the amounts the partnership should have told members to
report but didn't.
This
was changed because it was so complicated for the IRS to assess and
collect taxes and penalties owed under the old system that they did
not feel they were able to do a sufficient number of
audits.
Laurie
Frederiksen Invest with your friends! www.bivio.com
@Dick Lewis: Clubs do not normally pay taxes but they could
make mistakes or commit fraud in the reporting of partnership income and the
allocation thereof. Normally, the clubs are partnerships and report
income and the allocation of that income to the partners to the IRS and state
taxing authorities. If there is some egregious error in such reporting,
the partnership will be responsible for fines, etc. I do not know enough
of the tax law to know whether there might be cases where the partnership
might be responsible for individual partner tax errors, especially if the
problem arose because of improper partnership reporting.
This makes no sense how it would apply to stock clubs. It's my
understanding that clubs do not pay taxes. It's the members that pay
taxes due on any profits they took during the year. The club has no
capability of insuring that each member accounts properly on his tax return
for any profits taken . How can the IRS hold the club
responsible...... assuming that the clubs books are in order?
Am I missing something or interpreting this incorrectly?
Subject: [club_cafe] Changes Affecting Your Club for 2018 Tax
Reporting
Hi
all,
Now
that 2017 tax season has been put to bed, it is time for your
club to focus on one of the changes which you will be dealing
with when it comes time to prepare your 2018 taxes next
year.
Starting with your
2018 tax reporting, IRS partnership audit rules have
changed.
If the
IRS selects to audit your club tax returns, they are only
going to have discussions and negotiations with a single person
in your club. They will be called a partnership
representative and you will need to identify them when you
prepare your club taxes next year.
If they
find any deficiencies, the club and all current members
will be assessed for any and all back taxes and penalties that
are owed, even if the audit was of a past year
return.
This is
a big change from the way things have worked in the past.
The IRS
had been required to determine each partner's share of the
adjustments made to partnership audit problem items and then
compute a separate adjustment for each partner to assess the
correct tax due as a result of a partnership audit.
They
then had to collect individually from each partner. Now
they will be collecting from the club itself.
You will
have the option to "opt out" of this process, in which case the
IRS would have to audit each member of the club individually and
assess taxes and penalties owed at the partner level.
However, there are restrictions on opting out.
The one
that will probably affect the most clubs is that you can't have
a Trust as a member of your club and opt out.
This all
sounds scary and confusing as many tax things do,
but if you follow the guidelines we provide to keep your
club records and do your taxes accurately there is a very good
chance that if you were audited by the IRS, there wouldn't
be anything to find. If you are comfortable you are doing
that and that your club has done it in the past, it
doesn't matter what procedure the IRS uses to audit your
club.
Here is
an article from Forbes that does a pretty good job providing
some further details about the new requirements:
You'll
want to be discussing this change in your club
meetings.
You'll
need to determine if you want to opt out and whether you can opt
out.
If you
will not be opting out, you'll need to determine who you
will be designating as your partnership representative.
You may also want to discuss whether you want to modify your
partnership agreement to clarify the process you'd expect them
to follow if they did have to undertake negotiations with the
IRS on behalf of your club.
Laurie
Frederiksen Invest with your friends! www.bivio.com
Subject: Re: [club_cafe] Changes Affecting Your Club for 2018 Tax
Reporting
This
is a big change. If there is a mistake on the partnership
return, the partnership will be held responsible for paying
the tax on the income that was not correctly reported. You are
right that it did not work that way in the past but it will going
forward.
The
partnership will not be responsible for paying tax if individual
members do not report their share correctly. It will be
assessed on the amounts the partnership should have told members to
report but didn't.
This
was changed because it was so complicated for the IRS to assess and
collect taxes and penalties owed under the old system that they did
not feel they were able to do a sufficient number of
audits.
Laurie
Frederiksen Invest with your friends! www.bivio.com
@Dick Lewis: Clubs do not normally pay taxes but they could
make mistakes or commit fraud in the reporting of partnership income and the
allocation thereof. Normally, the clubs are partnerships and report
income and the allocation of that income to the partners to the IRS and state
taxing authorities. If there is some egregious error in such reporting,
the partnership will be responsible for fines, etc. I do not know enough
of the tax law to know whether there might be cases where the partnership
might be responsible for individual partner tax errors, especially if the
problem arose because of improper partnership reporting.
This makes no sense how it would apply to stock clubs. It's my
understanding that clubs do not pay taxes. It's the members that pay
taxes due on any profits they took during the year. The club has no
capability of insuring that each member accounts properly on his tax return
for any profits taken . How can the IRS hold the club
responsible...... assuming that the clubs books are in order?
Am I missing something or interpreting this incorrectly?
Subject: [club_cafe] Changes Affecting Your Club for 2018 Tax
Reporting
Hi
all,
Now
that 2017 tax season has been put to bed, it is time for your
club to focus on one of the changes which you will be dealing
with when it comes time to prepare your 2018 taxes next
year.
Starting with your
2018 tax reporting, IRS partnership audit rules have
changed.
If the
IRS selects to audit your club tax returns, they are only
going to have discussions and negotiations with a single person
in your club. They will be called a partnership
representative and you will need to identify them when you
prepare your club taxes next year.
If they
find any deficiencies, the club and all current members
will be assessed for any and all back taxes and penalties that
are owed, even if the audit was of a past year
return.
This is
a big change from the way things have worked in the past.
The IRS
had been required to determine each partner's share of the
adjustments made to partnership audit problem items and then
compute a separate adjustment for each partner to assess the
correct tax due as a result of a partnership audit.
They
then had to collect individually from each partner. Now
they will be collecting from the club itself.
You will
have the option to "opt out" of this process, in which case the
IRS would have to audit each member of the club individually and
assess taxes and penalties owed at the partner level.
However, there are restrictions on opting out.
The one
that will probably affect the most clubs is that you can't have
a Trust as a member of your club and opt out.
This all
sounds scary and confusing as many tax things do,
but if you follow the guidelines we provide to keep your
club records and do your taxes accurately there is a very good
chance that if you were audited by the IRS, there wouldn't
be anything to find. If you are comfortable you are doing
that and that your club has done it in the past, it
doesn't matter what procedure the IRS uses to audit your
club.
Here is
an article from Forbes that does a pretty good job providing
some further details about the new requirements:
You'll
want to be discussing this change in your club
meetings.
You'll
need to determine if you want to opt out and whether you can opt
out.
If you
will not be opting out, you'll need to determine who you
will be designating as your partnership representative.
You may also want to discuss whether you want to modify your
partnership agreement to clarify the process you'd expect them
to follow if they did have to undertake negotiations with the
IRS on behalf of your club.
Laurie
Frederiksen Invest with your friends! www.bivio.com
Hi Dick, I cannot speak for Bivio or Laurie, but I do not believe that Bivio or Laurie would want to say that errors do not occur. Bivio does not sign your Federal return as a preparer, so the responsibility for the accuracy of the Federal tax return lies totally with the club. If the club gets audited, the IRS puts the responsibility on the club. Your Financial Partner or whomever signs that return and assumes responsibility for the accuracy of the return. You could normally assume that IF the club kept its books accurately AND IF the club performed the "audit" before the tax return is due, THEN there should be no problems. But the ultimate liability rests with the club.
Subject: Re: [club_cafe] Changes Affecting Your Club for 2018 Tax
Reporting
This
is a big change. If there is a mistake on the partnership
return, the partnership will be held responsible for paying
the tax on the income that was not correctly reported. You are
right that it did not work that way in the past but it will going
forward.
The
partnership will not be responsible for paying tax if individual
members do not report their share correctly. It will be
assessed on the amounts the partnership should have told members to
report but didn't.
This
was changed because it was so complicated for the IRS to assess and
collect taxes and penalties owed under the old system that they did
not feel they were able to do a sufficient number of
audits.
Laurie
Frederiksen Invest with your friends! www.bivio.com
@Dick Lewis: Clubs do not normally pay taxes but they could
make mistakes or commit fraud in the reporting of partnership income and the
allocation thereof. Normally, the clubs are partnerships and report
income and the allocation of that income to the partners to the IRS and state
taxing authorities. If there is some egregious error in such reporting,
the partnership will be responsible for fines, etc. I do not know enough
of the tax law to know whether there might be cases where the partnership
might be responsible for individual partner tax errors, especially if the
problem arose because of improper partnership reporting.
This makes no sense how it would apply to stock clubs. It's my
understanding that clubs do not pay taxes. It's the members that pay
taxes due on any profits they took during the year. The club has no
capability of insuring that each member accounts properly on his tax return
for any profits taken . How can the IRS hold the club
responsible...... assuming that the clubs books are in order?
Am I missing something or interpreting this incorrectly?
Subject: [club_cafe] Changes Affecting Your Club for 2018 Tax
Reporting
Hi
all,
Now
that 2017 tax season has been put to bed, it is time for your
club to focus on one of the changes which you will be dealing
with when it comes time to prepare your 2018 taxes next
year.
Starting with your
2018 tax reporting, IRS partnership audit rules have
changed.
If the
IRS selects to audit your club tax returns, they are only
going to have discussions and negotiations with a single person
in your club. They will be called a partnership
representative and you will need to identify them when you
prepare your club taxes next year.
If they
find any deficiencies, the club and all current members
will be assessed for any and all back taxes and penalties that
are owed, even if the audit was of a past year
return.
This is
a big change from the way things have worked in the past.
The IRS
had been required to determine each partner's share of the
adjustments made to partnership audit problem items and then
compute a separate adjustment for each partner to assess the
correct tax due as a result of a partnership audit.
They
then had to collect individually from each partner. Now
they will be collecting from the club itself.
You will
have the option to "opt out" of this process, in which case the
IRS would have to audit each member of the club individually and
assess taxes and penalties owed at the partner level.
However, there are restrictions on opting out.
The one
that will probably affect the most clubs is that you can't have
a Trust as a member of your club and opt out.
This all
sounds scary and confusing as many tax things do,
but if you follow the guidelines we provide to keep your
club records and do your taxes accurately there is a very good
chance that if you were audited by the IRS, there wouldn't
be anything to find. If you are comfortable you are doing
that and that your club has done it in the past, it
doesn't matter what procedure the IRS uses to audit your
club.
Here is
an article from Forbes that does a pretty good job providing
some further details about the new requirements:
You'll
want to be discussing this change in your club
meetings.
You'll
need to determine if you want to opt out and whether you can opt
out.
If you
will not be opting out, you'll need to determine who you
will be designating as your partnership representative.
You may also want to discuss whether you want to modify your
partnership agreement to clarify the process you'd expect them
to follow if they did have to undertake negotiations with the
IRS on behalf of your club.
Laurie
Frederiksen Invest with your friends! www.bivio.com
Let me add to the previous responses. While bivio will produce "correct" tax returns and K-1s if the data within the accounting records are correct (data is a plural word), there is nothing within the software to save someone from their own ignorance - preparing a completely erroneous return. (For instance, a club that doesn't conduct an audit or review any of the transactions, etc.) In that case, the IRS will hold the club, as an independent entity, responsible for any tax due.
Here is a short list of transactions that could easily be "wrong":
- Member contributions recorded as club income
- Member withdrawals recorded as club expenses
- Cash transfers between accounts recorded as income and expense
- Enter stock purchases as expenses
- Enter stock sales as income (sales proceeds, not gain/loss)
- Dividends misclassified as qualifying when they aren't
- REIT dividends will have additional reporting requirements starting in 2018
- Distributions from investments in PTPs/MLPs/royalty trusts/WHFITs (Widely Held Fixed Investment Trusts, such as GLD and SLV)
- Recording nondeductible expenses as deductible
A club that pays attention to what it is doing shouldn't have any problem avoiding these issues.
Hi Dick, I cannot speak for Bivio or Laurie, but I do not believe that Bivio or Laurie would want to say that errors do not occur. Bivio does not sign your Federal return as a preparer, so the responsibility for the accuracy of the Federal tax return lies totally with the club. If the club gets audited, the IRS puts the responsibility on the club. Your Financial Partner or whomever signs that return and assumes responsibility for the accuracy of the return. You could normally assume that IF the club kept its books accurately AND IF the club performed the "audit" before the tax return is due, THEN there should be no problems. But the ultimate liability rests with the club.
Subject: Re: [club_cafe] Changes Affecting Your Club for 2018 Tax
Reporting
This
is a big change. If there is a mistake on the partnership
return, the partnership will be held responsible for paying
the tax on the income that was not correctly reported. You are
right that it did not work that way in the past but it will going
forward.
The
partnership will not be responsible for paying tax if individual
members do not report their share correctly. It will be
assessed on the amounts the partnership should have told members to
report but didn't.
This
was changed because it was so complicated for the IRS to assess and
collect taxes and penalties owed under the old system that they did
not feel they were able to do a sufficient number of
audits.
Laurie
Frederiksen Invest with your friends! www.bivio.com
@Dick Lewis: Clubs do not normally pay taxes but they could
make mistakes or commit fraud in the reporting of partnership income and the
allocation thereof. Normally, the clubs are partnerships and report
income and the allocation of that income to the partners to the IRS and state
taxing authorities. If there is some egregious error in such reporting,
the partnership will be responsible for fines, etc. I do not know enough
of the tax law to know whether there might be cases where the partnership
might be responsible for individual partner tax errors, especially if the
problem arose because of improper partnership reporting.
This makes no sense how it would apply to stock clubs. It's my
understanding that clubs do not pay taxes. It's the members that pay
taxes due on any profits they took during the year. The club has no
capability of insuring that each member accounts properly on his tax return
for any profits taken . How can the IRS hold the club
responsible...... assuming that the clubs books are in order?
Am I missing something or interpreting this incorrectly?
Subject: [club_cafe] Changes Affecting Your Club for 2018 Tax
Reporting
Hi
all,
Now
that 2017 tax season has been put to bed, it is time for your
club to focus on one of the changes which you will be dealing
with when it comes time to prepare your 2018 taxes next
year.
Starting with your
2018 tax reporting, IRS partnership audit rules have
changed.
If the
IRS selects to audit your club tax returns, they are only
going to have discussions and negotiations with a single person
in your club. They will be called a partnership
representative and you will need to identify them when you
prepare your club taxes next year.
If they
find any deficiencies, the club and all current members
will be assessed for any and all back taxes and penalties that
are owed, even if the audit was of a past year
return.
This is
a big change from the way things have worked in the past.
The IRS
had been required to determine each partner's share of the
adjustments made to partnership audit problem items and then
compute a separate adjustment for each partner to assess the
correct tax due as a result of a partnership audit.
They
then had to collect individually from each partner. Now
they will be collecting from the club itself.
You will
have the option to "opt out" of this process, in which case the
IRS would have to audit each member of the club individually and
assess taxes and penalties owed at the partner level.
However, there are restrictions on opting out.
The one
that will probably affect the most clubs is that you can't have
a Trust as a member of your club and opt out.
This all
sounds scary and confusing as many tax things do,
but if you follow the guidelines we provide to keep your
club records and do your taxes accurately there is a very good
chance that if you were audited by the IRS, there wouldn't
be anything to find. If you are comfortable you are doing
that and that your club has done it in the past, it
doesn't matter what procedure the IRS uses to audit your
club.
Here is
an article from Forbes that does a pretty good job providing
some further details about the new requirements:
You'll
want to be discussing this change in your club
meetings.
You'll
need to determine if you want to opt out and whether you can opt
out.
If you
will not be opting out, you'll need to determine who you
will be designating as your partnership representative.
You may also want to discuss whether you want to modify your
partnership agreement to clarify the process you'd expect them
to follow if they did have to undertake negotiations with the
IRS on behalf of your club.
Laurie
Frederiksen Invest with your friends! www.bivio.com
It includes a discussion of who can opt out and what you need to do to do so on your tax form.
What gets more complicated is that there are other changes probably coming to reporting for 2018 because of the massive tax law changes at the end of 2017. The IRS has not released any guidance on what those might be yet. You may need to comply with those also. We don't know that yet.
When you disband, you have not only income, but also final withdrawal information to report on your final taxes or K-1's.
So far, we are recommending you work with an accountant for partial year 2018 returns due to the uncertainty of what you need to file and the extra complexity of filling in final tax returns correctly.
It's up to you. The IRS does not issue an income threshhold below which you don't have to worry about an audit. Nor can we provide a judgement on that. That would also be something included in the services you'd get from an accountant.
Laurie Frederiksen Invest with your friends! www.bivio.com
How does this impact clubs that are disbanding in 2018?
I'm still not sure how even to prepare the final taxes using
the 2017 forms. Given that our expenses, exceed our
dividend income, it doesn't make sense to pay a professional
accountant to prepare our forms, as the site suggests.
I have been the one tasked with doing the treasury and tax
preparation, but by default, not because this is something
that I want to do, and definitely do not want to be held
accountable for any potential error from a previous
Treasurer.
Can a disbanding club "opt" out? Where is this done? The
club will not be in existance any more, so how would one go
about accessing the members, if the club doesn't opt out.
Except for one year, our club has had very little to zero
income (our expenses exceeded our dividend income). What
threshold does the audit use for determining if they will
audit a club.
It includes a
discussion of who can opt out and what you need to do to do so on
your tax form.
What gets more complicated is that
there are other changes probably coming to reporting for 2018
because of the massive tax law changes at the end of 2017. The
IRS has not released any guidance on what those might be yet.
You may need to comply with those also. We don't know
that yet.
When you disband, you have not
only income, but also final withdrawal information to report
on your final taxes or K-1's.
So far, we are recommending you work
with an accountant for partial year 2018 returns due to the
uncertainty of what you need to file and the extra complexity of
filling in final tax returns correctly.
It's up to you. The IRS
does not issue an income threshhold below which you don't have to
worry about an audit. Nor can we provide a judgement on
that. That would also be something included in the
services you'd get from an accountant.
Laurie
Frederiksen Invest with your friends! www.bivio.com
How
does this impact clubs that are disbanding in 2018?
I'm still not sure
how even to prepare the final taxes using the 2017 forms. Given that
our expenses, exceed our dividend income, it doesn't make sense to pay a
professional accountant to prepare our forms, as the site
suggests.
I have been the one tasked with doing the treasury and
tax preparation, but by default, not because this is something that I
want to do, and definitely do not want to be held accountable for any
potential error from a previous Treasurer.
Can a disbanding club
"opt" out? Where is this done? The club will not be in
existance any more, so how would one go about accessing the members, if the
club doesn't opt out.
Except for one year, our club has had very little
to zero income (our expenses exceeded our dividend income).
What threshold does the audit use for determining if they will audit a
club.
Thank you,
ira smilovitz on
Replying to both Mary and Dick,
No, it's not likely to get any better in future years and, surprisingly, this is not Trump's doing. It was enacted as Section 1101 of the Bipartisan Budget Act of 2015, but the onset was postponed to this year in the original language of the Act. The purpose of the changes is to make it easier for the IRS to audit partnerships, particularly the large, multi-tiered partnerships that have been created to obscure the ultimate ownership and reporting responsibility for partnership income. Investment clubs are just the tiniest speck in the partnership universe and we're stuck with whatever Congress decided.
It includes a
discussion of who can opt out and what you need to do to do so on
your tax form.
What gets more complicated is that
there are other changes probably coming to reporting for 2018
because of the massive tax law changes at the end of 2017. The
IRS has not released any guidance on what those might be yet.
You may need to comply with those also. We don't know
that yet.
When you disband, you have not
only income, but also final withdrawal information to report
on your final taxes or K-1's.
So far, we are recommending you work
with an accountant for partial year 2018 returns due to the
uncertainty of what you need to file and the extra complexity of
filling in final tax returns correctly.
It's up to you. The IRS
does not issue an income threshhold below which you don't have to
worry about an audit. Nor can we provide a judgement on
that. That would also be something included in the
services you'd get from an accountant.
Laurie
Frederiksen Invest with your friends! www.bivio.com
How
does this impact clubs that are disbanding in 2018?
I'm still not sure
how even to prepare the final taxes using the 2017 forms. Given that
our expenses, exceed our dividend income, it doesn't make sense to pay a
professional accountant to prepare our forms, as the site
suggests.
I have been the one tasked with doing the treasury and
tax preparation, but by default, not because this is something that I
want to do, and definitely do not want to be held accountable for any
potential error from a previous Treasurer.
Can a disbanding club
"opt" out? Where is this done? The club will not be in
existance any more, so how would one go about accessing the members, if the
club doesn't opt out.
Except for one year, our club has had very little
to zero income (our expenses exceeded our dividend income).
What threshold does the audit use for determining if they will audit a
club.
No, it's not likely to get any better in future years and, surprisingly, this is not Trump's doing. It was enacted as Section 1101 of the Bipartisan Budget Act of 2015, but the onset was postponed to this year in the original language of the Act. The purpose of the changes is to make it easier for the IRS to audit partnerships, particularly the large, multi-tiered partnerships that have been created to obscure the ultimate ownership and reporting responsibility for partnership income. Investment clubs are just the tiniest speck in the partnership universe and we're stuck with whatever Congress decided.
It includes a
discussion of who can opt out and what you need to do to do so on
your tax form.
What gets more complicated is that
there are other changes probably coming to reporting for 2018
because of the massive tax law changes at the end of 2017. The
IRS has not released any guidance on what those might be yet.
You may need to comply with those also. We don't know
that yet.
When you disband, you have not
only income, but also final withdrawal information to report
on your final taxes or K-1's.
So far, we are recommending you work
with an accountant for partial year 2018 returns due to the
uncertainty of what you need to file and the extra complexity of
filling in final tax returns correctly.
It's up to you. The IRS
does not issue an income threshhold below which you don't have to
worry about an audit. Nor can we provide a judgement on
that. That would also be something included in the
services you'd get from an accountant.
Laurie
Frederiksen Invest with your friends! www.bivio.com
How
does this impact clubs that are disbanding in 2018?
I'm still not sure
how even to prepare the final taxes using the 2017 forms. Given that
our expenses, exceed our dividend income, it doesn't make sense to pay a
professional accountant to prepare our forms, as the site
suggests.
I have been the one tasked with doing the treasury and
tax preparation, but by default, not because this is something that I
want to do, and definitely do not want to be held accountable for any
potential error from a previous Treasurer.
Can a disbanding club
"opt" out? Where is this done? The club will not be in
existance any more, so how would one go about accessing the members, if the
club doesn't opt out.
Except for one year, our club has had very little
to zero income (our expenses exceeded our dividend income).
What threshold does the audit use for determining if they will audit a
club.