club_cafe: FW: club_cafe: Bivio Tax question
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Henri,
Rip, would it make a difference if I printed out a tax return using the "snapshot" method to compare her numbers....if they matched, then she might be willing to just use the Bivio return... You could try it, but the prior years differences may screw things up. I learned that word from our president<g>. What should convince her is that she says it is too difficult to allocate income/expense when a new partner is admitted. [actually she should be doing it every month as the ownership percentages change.] Anyway, what is too difficult for her is done automatically by the computerized programs. I would be glad to talk to her about all of this if you want to put her in touch with me. Rip West
Saint Paul, MN I would argue that the second set of books she is keeping, and the tax returns she prepares, may not be in accordance with the terms of your Partnership Agreement. Only someone who is familiar with both can know for sure.
Ira Smilovitz
In a message dated 02/07/09 16:53:56 Eastern Standard Time, henri@rolandrussell.com writes:
Ira, << I would argue that the second set of books she is keeping, and the tax returns she prepares, may not be in accordance with the terms of your Partnership Agreement. Only someone who is familiar with both can know for sure. >> What leads you to believe that she may not be keeping the second set of books and tax returns in accordance with the partnership agreement? I have seen no evidence of that. Rip West Saint Paul, MN Okay, I am going armed tonight with the emails I have received from all y’all regarding the reasons we should only have one set of books and use Bivio exclusively for our tax return. I don’t know if they will have the tax return finished by tonight’s meeting, but I think they will have some numbers to discuss. I’ll report back what transpires. I don’t want our CPA to feel that I am trying to tell her that I know more than she does about taxes … just that Bivio experts know more about investment club partnership returns….Wish me luck. Henri Russell
You could try it, but the prior years differences may screw things up. I learned that word from our president<g>. What should convince her is that she says it is too difficult to allocate income/expense when a new partner is admitted. [actually she should be doing it every month as the ownership percentages change.] Anyway, what is too difficult for her is done automatically by the computerized programs. I would be glad to talk to her about all of this if you want to put her in touch with me. Rip West
Don't hold out too much hope. Your CPA (are you sure he/she's a CPA?) must know little about the nature of investment club partnerships, and have great faith in his/her knowledge, to not have clued in by now that something was amiss. I wouldn't worry excessively about a relatively small discrepancy. Just treat it as a misc. income/expense for the transition year, and hope it doesn't get audited, playing the percentage that the number of small investment clubs that are audited is quite small. Henri Russell wrote: > Okay, I am going armed tonight with the emails I have > received from all y’all regarding the reasons we should only have one set > of books and use Bivio exclusively for our tax return. I don’t know > if they will have the tax return finished by tonight’s meeting, but I > think they will have some numbers to discuss. > > I’ll report back what transpires. I don’t > want our CPA to feel that I am trying to tell her that I know more than she > does about taxes … just that Bivio experts know more about investment > club partnership returns….Wish me luck. > > Henri Russell > > > > You could try it, but the prior years differences may screw > things up. I learned that word from our president<g>. What should > convince her is that she says it is too difficult to allocate income/expense > when a new partner is admitted. [actually she should be doing it every month as > the ownership percentages change.] Anyway, what is too difficult for her > is done automatically by the computerized programs. > > I would be glad to talk to her about all of this if you > want to put her in touch with me. > > Rip West > Saint Paul, MN > > > > Thomas... You are so right....I took all the emails in to show her the responses (which were great and certainly convinced me)...she such poo pooed them.. She does have great confidence in her abilities ... and yes she is certainly a CPA...is a partner in a CPA Partnership and has a really good business. She does understand Partnership Returns...but I'm sure this is the only Investment Partnership Return that she does. She also mentioned that her Partnership tax software will do "weighted" numbers...whatever that means...since some members paid larger amounts at the end of the year to help buy out two departing members in order to not have to sell so much stock at the lower prices at the end of the year. She didn't have the partnership return finalized yet, but she did bring the K-1's to everyone at the meeting. She also brought me her numbers as compared to the Bivio Balance Sheet and there were some significant differences in the numbers. Her main question was a ($17,404.58) number for "Unrealized (Gains)/Losses Disbursed. My Schedule K-1 is quite different from the Bivio K-1 ... J. Partner's share of profit, loss an capital: On Bivio: Beginning: 10.24% Ending: 10.81% On the CPA'S: Beginning: 9.62% Ending: 9.25% 5. Interest Income: Bivio: .30 CPA: 0 6a. Ordinary dividends: Bivio: 183.14 CPA: 174 9a. Net LT Cap. Gain/Loss: Bivio: 55.22 CPA: 43 16. Under Foreign Transactions - Bivio lists the specifics; the CPA only lists "1" 20.A. Other Information: Bivio: 183.44 CPA: 174 B. Bivio: 15.82 CPA: 21 When I receive the return to sign and send in, I will send a copy to Bivio and see if they can determine any problems. All the members have a great deal of respect for the CPA/Partner, and do not want to make any changes, but accept her preparation numbers. I am completely out-numbered. 12-1. Henri Don't hold out too much hope. Your CPA (are you sure he/she's a CPA?) must know little about the nature of investment club partnerships, and have great faith in his/her knowledge, to not have clued in by now that something was amiss. I wouldn't worry excessively about a relatively small discrepancy. Just treat it as a misc. income/expense for the transition year, and hope it doesn't get audited, playing the percentage that the number of small investment clubs that are audited is quite small. Henri Russell wrote: > Okay, I am going armed tonight with the emails I have received from Henri Russell writes: > Beginning: 10.24% Ending: 10.81% > Beginning: 9.62% Ending: 9.25% This indicates a core difference in basic accounting. I don't think these differences can be resolved by you sending us your CPA's return. Our software simply calculates based on the data we have received. It sounds like your CPA is accounting for things very differently. For example, it's likely she's doing snapshot accounting, instead of time-based (which is "fairer", imiho). This is one of those typically irreconcilable differences between professionals. bivio is exclusively focused on investment partnership accounting and taxes. More importantly, our software is used by some extremely talented and smart people like Rip West, Ira Smilovitz, Jim Thomas, ... (if I didn't list you, sorry, the list would be VERY long for which bivio is extremely grateful :-). The software your CPA uses is not available for a 3 month free trial. Consider also that you can review any individual transaction entered into bivio, and also "dice and slice" your bivio accounting to verify the data are entered correctly. Your CPA is asking you to "trust her" data entry implicitly. Even the best of us make data entry errors. That's why it is unreasonable to assume her return is "correct". If I were in your club, I would demand an audit of the books as entered into your CPA's software. You would sit there with the transactions available from your broker (paper or electronic) and verify that they were entered correctly. You would also verify that the member allocations match bivio exactly. If they don't, you need to correct the numbers in bivio or the sofware your CPA is using. Cheers, Rob Since I may be at risk of losing my consulting job with Iclub, I do want to
clarify Rob's remarks. I don't presently belong to an investment club, so I
don't 'use' the bivio software. Rob has kindly left me access to bivio so that I
can answer questions the treasurers bring up, but I don't 'use' it for my own
purposes.
That being said, I am very interested in the situation that Henri has
brought up. The more we get into it, the more pitfalls I see with keeping what
seems like tow sets of books. To that end, I have offered my services to Henri
to try to straighten out situation. This effects more than bivio's software. I
recently had a case where someone using Club Accounting also prepared the tax
return using professional software. I think the more light we shed on this
subject, the better off we all will be.
Rip West
Saint Paul, MN > She didn't have the partnership return finalized yet, > but she did bring the K-1's to everyone at the meeting. It's hard to understand how you can distribute K-1's before having the tax return finalized. > Her main question was a ($17,404.58) number for > "Unrealized (Gains)/Losses Disbursed. Look at the withdrawal report for one of your members. It will indicate a gain or loss for that member upon their withdrawal from the club (the difference between the market value of their withdrawal and their adjusted tax basis in the club). "Unrealized (Gains)/Losses Disbursed" on the Balance Sheet is the sum of the gain/loss shown on all withdrawal reports over the life of the club. You can see this on the Transaction Ledger in the Unrealized Gain column. That column is adjusted at the end of each year for withdrawals during the year. -Jim Thomas The only thing she lacked on the tax return was filling in one social security number for one member that had withdrawn from the club in December. She just didn't have time to print the return in final form to give to me before the meeting. I had emailed her to social security information, but she had not been in the office after I emailed it to her. She will mail the K-1 to the withdrawn member with the social security number filled in. Henri > She didn't have the partnership return finalized yet, > but she did bring the K-1's to everyone at the meeting. It's hard to understand how you can distribute K-1's before having the tax return finalized. Does she charge more than $99 for this "service"? It's interesting that Bivio shows your % of club increasing, while hers shows it decreasing, over 2008. I suspect she might be valuing any midyear member termination payoffs at yearend value, so they would (erroneously) have a greater % of the yearend balance than Bivio. I'm guessing your club to be about $100K. If the totals for the club are alike in both methods, then it's just the individual partners that are misstated. Not so bad if you had a smaller share of losses in 2008, but some year you may have an improperly larger share of gains. Can you tell us size of club, amount of any terminations? If there were none, and your investment payments were proportionally more for your 10% than your fellow partners, how does she explain a decreasing ownership share for you? 12-1, stiff odds. Best to lobby behind the scene to get more people on your side, by alerting them to the risks of, for example, overpaying a terminating member from current partner's equity. Then you could have a sort of runoff, wherein you ran one set of a year's sample data through both Bivio (the trial site) and her. Then have her explain any difference. It would have to be simple enough to manually calculate as well, wherein you could compute by hand the same data as bivio. Hers will undoubtedly be different, probably because it's not time- and dollar- weighted. Henri Russell wrote: > Thomas... > > You are so right....I took all the emails in to show her the responses > (which were great and certainly convinced me)...she such poo pooed them.. > She does have great confidence in her abilities ... and yes she is certainly > a CPA...is a partner in a CPA Partnership and has a really good business. > She does understand Partnership Returns...but I'm sure this is the only > Investment Partnership Return that she does. She also mentioned that her > Partnership tax software will do "weighted" numbers...whatever that > means...since some members paid larger amounts at the end of the year to > help buy out two departing members in order to not have to sell so much > stock at the lower prices at the end of the year. > > She didn't have the partnership return finalized yet, but she did bring the > K-1's to everyone at the meeting. She also brought me her numbers as > compared to the Bivio Balance Sheet and there were some significant > differences in the numbers. Her main question was a ($17,404.58) number for > "Unrealized (Gains)/Losses Disbursed. > > My Schedule K-1 is quite different from the Bivio K-1 ... > > J. Partner's share of profit, loss an capital: > On Bivio: > Beginning: 10.24% Ending: 10.81% > > On the CPA'S: > Beginning: 9.62% Ending: 9.25% > > 5. Interest Income: Bivio: .30 > CPA: 0 > > 6a. Ordinary dividends: Bivio: 183.14 > CPA: 174 > > 9a. Net LT Cap. Gain/Loss: Bivio: 55.22 > CPA: 43 > > 16. Under Foreign Transactions - Bivio lists the specifics; the CPA only > lists "1" > > 20.A. Other Information: Bivio: 183.44 > CPA: 174 > > B. Bivio: 15.82 > CPA: 21 > > When I receive the return to sign and send in, I will send a copy to Bivio > and see if they can determine any problems. > > All the members have a great deal of respect for the CPA/Partner, and do not > want to make any changes, but accept her preparation numbers. I am > completely out-numbered. 12-1. > > Henri > > > Don't hold out too much hope. Your CPA (are you sure he/she's a CPA?) must > know little about the nature of investment club partnerships, and have great > faith in his/her knowledge, to not have clued in by now that something was > amiss. > I wouldn't worry excessively about a relatively small discrepancy. Just > treat it as a misc. income/expense for the transition year, and hope it > doesn't get audited, playing the percentage that the number of small > investment clubs that are audited is quite small. > Henri Russell wrote: > > Okay, I am going armed tonight with the emails I have received from This is probably a dumb question, but when you mail the 1065 tax return to the IRS, is it necessary to mail copies of the Page 2 of the K-1's (which is simply instructions for the taxpayer) with the return or can you simply attach the page 1 of the K-1 to the 1065? Bivio, of course, prints out the 2nd page for each K-1. I just didn't' know if it was necessary to mail each of those pages along with the return also, along with the "This page intentionally left blank" page. Thanks, Henri Henri,
No, not necessary.
Rip West Saint Paul, MN In the past, I have only mailed the copy of Page 2 to each member. I have kept one in our files and marked it "This page sent to each member" but only had one for the files. I have not sent that page in with Form 1065 ever, and have had no problems with IRS. I think they don't want the extra paper either.... I am not a qualified expert so perhaps one of them will respond to this question, but I am reminded of an old saying, printed on several business cards and that is: "The only dumb question is the question not asked." Hope someone with credentials answers you soon .............. Myrelle -----Original Message----- From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of Henri Russell Sent: Thursday, February 19, 2009 8:41 PM To: 'The Club Cafe' Subject: club_cafe: Tax Return Question This is probably a dumb question, but when you mail the 1065 tax return to the IRS, is it necessary to mail copies of the Page 2 of the K-1's (which is simply instructions for the taxpayer) with the return or can you simply attach the page 1 of the K-1 to the 1065? Bivio, of course, prints out the 2nd page for each K-1. I just didn't' know if it was necessary to mail each of those pages along with the return also, along with the "This page intentionally left blank" page. Thanks, Henri No virus found in this incoming message. Checked by AVG - www.avg.com Version: 8.0.237 / Virus Database: 270.11.1/1960 - Release Date: 02/19/09 10:48:00 |
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