Communications
club_cafe
HelpRegister
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:

The Game Has Changed

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

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe

Laurie,
 
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? 
 
Dick Lewis
GMIC   
 
Sent: Friday, May 04, 2018 11:33 AM
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:

The Game Has Changed

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

Become our Facebook friend!  www.facebook.com/bivio
Follow us on twitter!  www.twitter.com/
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list.  Click here to  Unsubscribe

@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.

Regards,

Peter Dunkelberger

On Mon, May 7, 2018 at 1:01 PM, Dick Lewis via bivio.com <user*30211200001@bivio.com> wrote:
Laurie,
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?
Dick Lewis
GMIC
Sent: Friday, May 04, 2018 11:33 AM
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:

The Game Has Changed

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

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe


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

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe



On Mon, May 7, 2018 at 1:13 PM, Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:
@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.

Regards,

Peter Dunkelberger

On Mon, May 7, 2018 at 1:01 PM, Dick Lewis via bivio.com <user*30211200001@bivio.com> wrote:
Laurie,
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?
Dick Lewis
GMIC
Sent: Friday, May 04, 2018 11:33 AM
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:

The Game Has Changed

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

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe



So...... If we pass our annual club audit and our books balance, then we're dependent on Bivio's tax software to generate the K-1's correctly.  Right?
 
Treasurer's who refuse to "cook the books", so to speak, should have no fear of being audited by the IRS. 
 
Dick
 
Sent: Monday, May 07, 2018 1:29 PM
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

Become our Facebook friend!  www.facebook.com/bivio
Follow us on twitter!  www.twitter.com/
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list.  Click here to  Unsubscribe

 
 
On Mon, May 7, 2018 at 1:13 PM, Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:
@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.
 
Regards,
 
Peter Dunkelberger
 
On Mon, May 7, 2018 at 1:01 PM, Dick Lewis via bivio.com <user*30211200001@bivio.com> wrote:
Laurie,
 
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? 
 
Dick Lewis
GMIC   
 
Sent: Friday, May 04, 2018 11:33 AM
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:

The Game Has Changed

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

Become our Facebook friend!  www.facebook.com/bivio
Follow us on twitter!  www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list.  Click here to  Unsubscribe

 
 

If your accounting records are correct in bivio your tax forms will be prepared correctly.

We give you procedures and instructions to follow to make sure this is the case.

If you follow them, you shouldn't have anything to worry about even if you were audited.

Laurie Frederiksen
Invest with your friends!
www.bivio.com

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe



On Mon, May 7, 2018 at 1:46 PM, Dick Lewis via bivio.com <user*30211200001@bivio.com> wrote:
So...... If we pass our annual club audit and our books balance, then we're dependent on Bivio's tax software to generate the K-1's correctly. Right?
Treasurer's who refuse to "cook the books", so to speak, should have no fear of being audited by the IRS.
Dick
Sent: Monday, May 07, 2018 1:29 PM
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

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe

On Mon, May 7, 2018 at 1:13 PM, Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:
@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.
Regards,
Peter Dunkelberger
On Mon, May 7, 2018 at 1:01 PM, Dick Lewis via bivio.com <user*30211200001@bivio.com> wrote:
Laurie,
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?
Dick Lewis
GMIC
Sent: Friday, May 04, 2018 11:33 AM
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:

The Game Has Changed

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

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe


@dick lewis

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.

Regards.

Peter Dunkelberger

On Mon, May 7, 2018 at 1:46 PM, Dick Lewis via bivio.com <user*30211200001@bivio.com> wrote:
So...... If we pass our annual club audit and our books balance, then we're dependent on Bivio's tax software to generate the K-1's correctly. Right?
Treasurer's who refuse to "cook the books", so to speak, should have no fear of being audited by the IRS.
Dick
Sent: Monday, May 07, 2018 1:29 PM
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

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe

On Mon, May 7, 2018 at 1:13 PM, Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:
@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.
Regards,
Peter Dunkelberger
On Mon, May 7, 2018 at 1:01 PM, Dick Lewis via bivio.com <user*30211200001@bivio.com> wrote:
Laurie,
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?
Dick Lewis
GMIC
Sent: Friday, May 04, 2018 11:33 AM
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:

The Game Has Changed

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

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe


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.

Ira Smilovitz

On Mon, May 7, 2018 at 2:01 PM Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:
@dick lewis

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.

Regards.

Peter Dunkelberger

On Mon, May 7, 2018 at 1:46 PM, Dick Lewis via bivio.com <user*30211200001@bivio.com> wrote:
So...... If we pass our annual club audit and our books balance, then we're dependent on Bivio's tax software to generate the K-1's correctly. Right?
Treasurer's who refuse to "cook the books", so to speak, should have no fear of being audited by the IRS.
Dick
Sent: Monday, May 07, 2018 1:29 PM
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

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe

On Mon, May 7, 2018 at 1:13 PM, Peter Dunkelberger via bivio.com <user*26984900001@bivio.com> wrote:
@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.
Regards,
Peter Dunkelberger
On Mon, May 7, 2018 at 1:01 PM, Dick Lewis via bivio.com <user*30211200001@bivio.com> wrote:
Laurie,
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?
Dick Lewis
GMIC
Sent: Friday, May 04, 2018 11:33 AM
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:

The Game Has Changed

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

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe