club_cafe: Bivio Tax question
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Ira said: The professional partnership software used by most CPAs doesn't prepare an accurate investment club return because each item of income and expense during the year is allocated differently, based on the ownership shares on that date.
That’s sort of what I was thinking. She has been doing our return for years, and I’m sure she is using her professional software. I just wanted to hear from those of you that have been using the Bivio software. I feel comfortable with it. She will probably go ahead and use her own software to file our return for the club, but since it is consistent with the way she has filed it for the past 15 years, I’m sure it is okay. I’ve been trying to get her to use the Bivio tax program, but she wants to do it her way. And that’s probably okay, because it is a second set of books that she creates which works as an additional audit of the books.
I just started a new investment club in July, so I am just going strictly with Bivio and I feel completely comfortable with it. It only took 5 minutes to prepare the return. Wow, how easy is that.
Henri
Henri,
Ira's remarks, while true, wouldn't account for the difference of $175,
unless that difference was in the amount of income allocated to a specific
partner. In other words, the income allocation between partners would be
different, but not the overall income. Since you have raised the question
here, I think everyone would feel better if you submitted the data to bivio and
let them investigate. I know I would.
Rip West Saint Paul, MN
Hi Henri,
Actually, it's really not OK. More clubs have fallen victim to a CPA or Accounting professional who took over the books and did it "their way" until they left the club. We've heard of clubs who had to fold since no one knew how to pick up the accounting they set up.
Is she still doing the books out of fear that no one else can? Or out of control? Or out of complete and utter devotion to the club? You should have her consider stepping back and letting someone new take over. She could be a great role model and support system for them. bivio can do the rest.
Lynn O.
At 03:28 PM 2/7/2009, you wrote:
I agree with Lynn. First, there is really no reason to have a CPA or "tax" person do the club taxes. They're really easy with Bivio and there is plenty of support here if you need it. Second, no single person should be the club's treasurer year after year after year. I could list a million and one reasons!!! Third, ALWAYS do an audit of the books. The best time is prior to the taxes being filed. That way if there are errors they can be corrected. Just because your statements balance doesn't mean that the amounts were entered correctly. At least two people besides the treasurer should audit the club's records. I suggest that the treasurer be present at the audit to answer questions etc but to make themselves scarce so that the auditors can talk freely without feeling like they might offend someone. BTW, when a treasurer is offended by questions its like waving a big red flag!!! Our club has a treasurer and an assistant Treas. The assistant can help when the treas. is not available and is also "in training" for the future. You should have her consider stepping back and letting someone new take over. She could be a great role model and support system for them. bivio can do the rest. Oh so true. Cherilyn J. Peay PO Box 1408 Bernalillo, NM 87004-1408 (505) 867-4379 (505) 867-4224 fax Hi Henri.. Although I'm not an accountant, I have been treasurer of two investment clubs and have used Bivio ever since it came on the market . Between the two clubs, I've probably run at least a dozen returns.. At tax time it is a pleasure, and it saves us time and money not requiring an accountant for the club's returns. I must ask why would you pay an accountant do your club returns ? For $99 per year Bivio does it all. Not only do we get current reports, but at tax time I can run the 1065 and K-1' s in a little more than the travel time to my accountant. I never had any problems with the IRS and we have a medium six figure portfolio. Arthur Klages, Treas. Senior Investment Club LC -----Original Message----- From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of Henri Russell Sent: Saturday, February 07, 2009 4:31 PM To: club_cafe@bivio.com Subject: club_cafe: FW: club_cafe: Bivio Tax question Ira said: The professional partnership software used by most CPAs doesn't prepare an accurate investment club return because each item of income and expense during the year is allocated differently, based on the ownership shares on that date. That's sort of what I was thinking. She has been doing our return for years, and I'm sure she is using her professional software. I just wanted to hear from those of you that have been using the Bivio software. I feel comfortable with it. She will probably go ahead and use her own software to file our return for the club, but since it is consistent with the way she has filed it for the past 15 years, I'm sure it is okay. I've been trying to get her to use the Bivio tax program, but she wants to do it her way. And that's probably okay, because it is a second set of books that she creates which works as an additional audit of the books. I just started a new investment club in July, so I am just going strictly with Bivio and I feel completely comfortable with it. It only took 5 minutes to prepare the return. Wow, how easy is that. Henri Lynn, Actually, previously she has been the only one that had experience to do it. We now have a new member who has just become a CPA and she is actually going to do the taxes this year, under the supervision of the older member. So, we are in the process of “training” someone to take over. So, I think we are going to be okay. And I do like the idea that we will have someone else that will be able to do the return, as we know, people come and go, even though she has been with the club from the start. You never know when something can happen. I think if I can get them to “trust” Bivio (which I think the new member will), we will have it made!! I think Rip has a good idea, too. Once I get a list of the discrepancies that the CPA has with the Bivio tax return, I can ask Bivio to review them and see if it is actually the CPA or Bivio. And to be fair, she only made a cursory review of the numbers as she and the new member have not finished their preparation of the tax return. Once they get all their numbers correct, it may match up. I love Bivio. It took me minutes to prepare the tax return for our 6 month old club. Of course, we only had a few cents interest and two expenses…LOL…but can see how it will be a life saver in the future. Henri Hi Henri,
Actually, it's really not OK. More clubs have fallen victim to a CPA or Accounting professional who took over the books and did it "their way" until they left the club. We've heard of clubs who had to fold since no one knew how to pick up the accounting they set up.
Is she still doing the books out of fear that no one else can? Or out of control? Or out of complete and utter devotion to the club? You should have her consider stepping back and letting someone new take over. She could be a great role model and support system for them. bivio can do the rest.
Lynn O.
Yep, I think it's a great idea to have a new treasurer coming in...and using Bivio exclusively, in the future.
I just did my club taxes today, too. We're an 8 year old club and it only took me a couple minutes, as well. I do love Bivio!
Lynn O.
Oh, we do not pay our CPA to do the taxes. She is a member of the club and she does it free gratis. I think it is good that she is training the new member to do the taxes. Henri I must ask why would you pay an accountant do your club returns ? Henri,
I'll bet you're sorry that you ever brought this up<g>. Having said
that, I have been thinking more and more about this. I think there is a real
problem filing your tax return as prepared by one of your members and
continuing to keep your records on bivio. I hasten to add there would be the
same problem if you were using IClub and the differences were substantial. You
said that the differences amounted to about $175. Could you tell us a little bit
about that? Where did the differences occur?
Here is my problem with the whole matter. If you are filing your return
using those figures and keeping your books using bivio figures, the basis of
your members is going to be different between bivio and what you have filed with
the IRS. When it comes time to withdraw one of those members, bivio figures what
that member's gain/loss should be. Will the member use that number or will your
CPA member supply the withdrawing member with a figure?
The more I think about it, the bigger mess I think you are getting into. I
really advise you to get the matter resolved, find the problem areas, and,
if necessary, adjust the bivio records to agree with what has been filed.
Maybe this concern on my part isn't warranted. If you could just let us
know what is the nature of the differences, I could probably calm
down<g>.
Rip West Saint Paul, MN > I'll bet you're sorry that you ever brought this up<g>.
I was thinking the same thing! <G> To the non-tax-professional (that would be most of us), it would seem almost obvious that having an accounting-type person available to do our club books is a boon! Until, of course, you get a little seasoned and start having to deal with the problems created by this situation. Unfortunately, these issues don't rear their ugly head until we are much farther down the road.
>...When it comes time to withdraw one of those members, bivio figures what that
> member's gain/loss should be.
Excellent reason why clubs should use the bivio software, even if the person responsible for the books is a CPA. It's usually in their nature to want to do it themselves, but when they leave the club (and they always do...eventually!) it just makes the transition so seemless.
Hey Rip, I'll bet you lunch at Macaroni Grill later this week that the difference is in the Allocation Method! <G> It would be interesting to find out.
Lynn Ostrem, Minneapolis garbagecop@gmail.com Join me at InvestEd 2009 August 7-9, Salt Lake City, UT www.investor-education2009.org Rip, You have certainly gotten my attention. The CPA/Partner said she and the new member that she is training to do the return have not gotten together to do the return as yet. So, her review of the Bivio return was a cursory review and compared to her preliminary numbers. She said she would bring her figures to the meeting we have on the 12th so that we could look at them further. Once she has the return completed, I will definitely send them to Bivio for a comparison (if there are still differences) so get their take on it, and if necessary adjust my figures in Bivio to match our prior returns so there will be no problem. It may be a couple of weeks or so before I get the CPA’s final numbers. Then, I will post any differences/concerns and we’ll continue the discussion. It is always good to get the opinions from this list because I know I’m getting a collection of very good heads giving me advice and thoughts to consider so that the matter can be dealt with properly. Below is the email that I received from our CPA/Partner regarding her first review and differences in her numbers and Bivio’s numbers: Hi Henri, I have worked on Commonwealth recently so am up with some of the numbers. Elaine said she wanted to do the return so I have numbers together for her but she hasn't set a time to come by. I had a discrepancy on the msft loss of about $100. The basis could have been different from an earlier sale. (My basis was $2,717.43. Your basis was $2,811.36) There is also a $3 difference in the Ameritrade cash that I haven't looked into. Some of my cost basis numbers are different from yours. Again, this might go back to the dividend reinvesting days. I will bring my list on Thurs. The biggest difference in the return will be the K-1's. If you will note on yours, some partners have negative capital gain, some have positive. If you strictly follow the rules, every time a new partner is admitted, the books must be closed, gain/loss figured for each partner and new books opened. We sold stocks at a gain early in the year and stocks at a loss late in the year. I don't go back and close the books and refigure (too much work for not much money involved). I just take each persons % at the end of the year and allocate according to capital balances. The allocation is $1,813.59 in dividends and gain of $444.94 with 14 partners so the numbers are small. You will note that Jennifer Brooks has negative gain and she joined late in the year. I don't understand why Elaine would have negative gain as she was a member all year. The one big thing the program doesn't do is show capital accounts on the K-1's. On the ones I send there is a beginning balance from last year, contributions for this year and an end of the year balance. Those balances are cost basis for determining gain or loss. I didn't compare the % allocations to mine. I will have to look at that. Also, your bivio partner balances are different from mine. Some are close but some are very different. Another thing I noted was the cost basis number that Ameritrade has are not the same numbers that I have or you have on bivio. I think when you transferred some stocks in from the other account, they used FMV not our cost. Your numbers and mine are only different by about $175. Ameritrade show cost at 73,043.21. You show 69,305.88 and I think I show 69,480.09. Now have I totally confused you? I will try to bring numbers for comparison next week. One thing … on the Ameritrade cost basis , I think when we transferred our DRIP stocks into Ameritrade, on the cost basis, I used the figures on the basis from the BI Accounting program. It seems I had to manually add the cost basis to Ameritrade…but that’s been so long ago, I don’t remember for sure. I have all the records and could go back, but hopefully that won’t be necessary. We have used the BI Accounting program from the very first….until we converted over to Bivio. Would this make a difference? Thanks to all of you. I will keep you posted on the final numbers from the CPA/Partner and the differences, if any. Henri Henri,
I'll bet you're sorry that you ever brought this up<g>. Having said that, I have been thinking more and more about this. I think there is a real problem filing your tax return as prepared by one of your members and continuing to keep your records on bivio. I hasten to add there would be the same problem if you were using IClub and the differences were substantial. You said that the differences amounted to about $175. Could you tell us a little bit about that? Where did the differences occur?
**** Maybe this concern on my part isn't warranted. If you could just let us know what is the nature of the differences, I could probably calm down<g>.
Rip West
If you strictly follow the rules, every time a new partner is admitted, the books must be closed, gain/loss figured for each partner and new books opened. We sold stocks at a gain early in the year and stocks at a loss late in the year. I don't go back and close the books and refigure (too much work for not much money involved). I just take each persons % at the end of the year and allocate according to capital balances.
Oy vey!! Another reason to use bivio software exclusively! I love you CPA out there! But you make things too difficult! One thing you said, Henri, was that the new treasurer wanted to be the one to do the taxes. Does this mean by hand? Because as you already know, doing them by "bivio" means pushing a couple of keys on your computer.
You'll get this straightened out!
Lynn O.
(P.S. I just knew it has to do with Allocation! <G> But obviously, that's not the only issue!) Hi Henri,
Thanks for the additional information. I am going to comment on the
differences, but remember (1) I don't have all the information, and (2) this is
for only one year. The prior year differences may be extensive.
I had a discrepancy on the msft loss of about $100. The basis could have been different from an earlier sale. (My basis was $2,717.43. Your basis was $2,811.36) This definitely should be investigated. bivio would keep the correct cost
basis, but when you selected lots for this or prior sales of msft, there could
be differences. Remember that the cost of lots sold are figured on a FIFO basis,
unless you have instructed your broker otherwise. It is very important that you
reconcile the cost basis of all your existing stocks against your CPA's figures,
and make adjustments.
There is also a $3 difference in the Ameritrade cash that I haven't looked into. Not significant, but you should get it reconciled.
Some of my cost basis numbers are different
from yours. Again, this might go back to the dividend reinvesting
days.
It is very important that
this these differences be reconciled and the two sets of books made to be the
same.
The biggest difference in the return will be the
K-1's. If you will note on yours, some partners have negative capital
gain, some have positive. If you strictly follow the rules, every time a
new partner is admitted, the books must be closed, gain/loss figured for each
partner and new books opened. We sold
stocks at a gain early in the year and stocks at a loss late in the year.
I don't go back and close the books and refigure (too much work for not much
money involved). I just take each persons % at the end of the year and
allocate according to capital balances. The allocation is $1,813.59 in
dividends and gain of $444.94 with 14 partners so the numbers are small.
You will note that Jennifer Brooks has negative gain and she joined late in the
year. I don't understand why Elaine would have negative gain as she was a
member all year.
bivio and IClub offer two ways to do this 1) Time-based and 2) Snapshot.
Time based is preferable, because a member won't have to report a capital gain
that was realized before he-she became a member. Your CPA is using the snapshot
method, which is certainly easier from her standpoint, but not as desirable.
Before the advent of computer based programs, snapshot was the only method
advocated by NAIC. Now, I believe, everyone advocates time-based.
The one big thing the program doesn't do is show capital accounts on the K-1's. On the ones I send there is a beginning balance from last year, contributions for this year and an end of the year balance. Those balances are cost basis for determining gain or loss. I didn't compare the % allocations to mine. I will have to look at that. It's true the capital accounts are not shown on the tax return, because
that is not necessary for your size club. However, you do have that information
available. The member status report will show a column for members' capital
account. Run that report as of 12/31/08. It is very important that you
reconcile bivio's capital accounts with those of your CPA.
As for the differences on the drip accounts transferred to Ameritrade, very
likely the wrong amounts were given to Ameritrade. Ameritrade's figures are not
official and are not submitted to the IRS, but I would think you would want to
get them corrected.
So what does this all mean? More than ever, I think you are making a
serious mistake in keeping two sets of books. You may not think you are doing
that simply by having your partner CPA do the tax returns, but you really are.
Speaking as someone who has worked long and hard to make sure that both bivio
and IClub prepare accurate returns, I am convinced that you would be much better
off to stick with bivio's returns for 2008 and the future, after ascertaining if
there need to be any corrections made.
Rip West
Saint Paul, MN Boy Henri you sure go this list moving. Another reason to audit the books. If there were two sets they should be identical AND both should be audited!! Two sets of books??? Why? Because the CPA can't file the return using their software without "creating" a set. At 01:31 PM 2/8/2009, you wrote: So what does this all mean? More than ever, I think you are making a serious mistake in keeping two sets of books.Cherilyn J. Peay PO Box 1408 Bernalillo, NM 87004-1408 (505) 867-4379 (505) 867-4224 fax Lynn, No, I do not think she does it by hand. She has tax software that she uses. However, I think she must have to input all the information that I give her through the bank statements and brokerage statements. I also furnished her all the year end reports from Bivio. This is something that we will definitely have to discuss when we have our next meeting on the 12th. She has always done the tax returns for the Club since its inception in 1995 and everyone has a lot of respect for her opinions. I hope that I am able to convince her … and thus the other members…that we definitely need to just use the Bivio tax returns and one set of books. And like you say, 5 minutes and its done with a few clicks of the computer.
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…
Henri
If you
strictly follow the rules, every time a new partner is admitted, the books must
be closed, gain/loss figured for each partner and new books opened. We
sold stocks at a gain early in the year and stocks at a loss late in the
year. I don't go back and close the books and refigure (too much work for
not much money involved). I just take each persons % at the end of the
year and allocate according to capital balances.
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