Communications
club_cafe
HelpRegister
New IRS Audit Procedures - Our Recommendations


Time to get your ducks in a row!

It's time to make a change.

Our goal at bivio is to make sure your club operations can be as simple as possible so you can have an investment club and learn about investing in a real life "lab" and not get bogged down by cumbersome accounting or legal issues.

Toward that goal, we provide guidance on investments (e.g. MLP's, REIT's) and investing techniques( e,g. DRIP investing) which will give your club extra work and headaches and recommend you avoid these as part of your club investing. We also provide you with guidelines and help keeping your investment club accounting simple.

Along these lines we are making the following recommendations for addressing the new Centralized Partnership Audit Requirements which were described here earlier.

CPAR Changes

We recommend that investment clubs operate in such a manner that they are eligible to "opt out" of the new requirements. This means you will need to follow the guidelines shown below:

Opt Out Requirements

To institute these changes in your operations will probably require that you modify your partnership agreement appropriately. We have made modifications to paragraphs 16, 18 23 and 24 in our recommended partnership agreement (below) to address this. We suggest your club adopt similar changes to your agreements.

Revised Partnership Agreement

Though this change in IRS requirements is creating a need for you to address an administrative issue with your club, we don't expect any investment clubs that follow our guidelines for regular monthly, annual and tax time verification of the accuracy of their club records to have any IRS audit issues they will have to address.

If your club does not want to follow our recommendations and thus will not be able to opt out of the new audit filing requirements, you will need to name a "Partnership Representative" each tax year. The representative will have sole authority to negotiate with the IRS and bind the club to any agreement reached without any consultation or input from the club.

Any agreement you want to make between your club and the representative in terms of how they will address an audit situation must be called out in your partnership agreement. While failure to follow those requirements will not have an affect on any agreements made between the representative and the IRS, their breach may allow you to seek damages from the member who made them.

We will outline some of the issues you'll need to address in a separate email.

Clubs which "opt out" do not have to designate a partnership representative.

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

Laurie,

Thanks for the info. We are an LLC and not a partnership. It appears to me that we are treated as a partnership in tax matters and haven't had a problem in the past. Do these changes apply to the LLC as well?

Thanks,

Dave Vandaveer

Friday Depositors Investment Club (FDIC)


On 10/19/2018 11:25 AM, Laurie Frederiksen wrote:


Time to get your ducks in a row!

It's time to make a change.

Our goal at bivio is to make sure your club operations can be as simple as possible so you can have an investment club and learn about investing in a real life "lab" and not get bogged down by cumbersome accounting or legal issues.

Toward that goal, we provide guidance on investments (e.g. MLP's, REIT's) and investing techniques( e,g. DRIP investing) which will give your club extra work and headaches and recommend you avoid these as part of your club investing. We also provide you with guidelines and help keeping your investment club accounting simple.

Along these lines we are making the following recommendations for addressing the new Centralized Partnership Audit Requirements which were described here earlier.

CPAR Changes

We recommend that investment clubs operate in such a manner that they are eligible to "opt out" of the new requirements. This means you will need to follow the guidelines shown below:

Opt Out Requirements

To institute these changes in your operations will probably require that you modify your partnership agreement appropriately. We have made modifications to paragraphs 16, 18 23 and 24 in our recommended partnership agreement (below) to address this. We suggest your club adopt similar changes to your agreements.

Revised Partnership Agreement

Though this change in IRS requirements is creating a need for you to address an administrative issue with your club, we don't expect any investment clubs that follow our guidelines for regular monthly, annual and tax time verification of the accuracy of their club records to have any IRS audit issues they will have to address.

If your club does not want to follow our recommendations and thus will not be able to opt out of the new audit filing requirements, you will need to name a "Partnership Representative" each tax year. The representative will have sole authority to negotiate with the IRS and bind the club to any agreement reached without any consultation or input from the club.

Any agreement you want to make between your club and the representative in terms of how they will address an audit situation must be called out in your partnership agreement. While failure to follow those requirements will not have an affect on any agreements made between the representative and the IRS, their breach may allow you to seek damages from the member who made them.

We will outline some of the issues you'll need to address in a separate email.

Clubs which "opt out" do not have to designate a partnership representative.

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


The new audit procedures apply to investment clubs that are LLC's also.

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 Sat, Oct 20, 2018 at 9:42 AM Dave Vandaveer via bivio.com <user*15796400001@bivio.com> wrote:

Laurie,

Thanks for the info. We are an LLC and not a partnership. It appears to me that we are treated as a partnership in tax matters and haven't had a problem in the past. Do these changes apply to the LLC as well?

Thanks,

Dave Vandaveer

Friday Depositors Investment Club (FDIC)