© copyright 2006 iclubcentral – all rights reserved don’t do that! by daniel abraham invested...

© Copyright 2006 ICLUBcentral – All rights reserved

Don’t Do That!

By Daniel Abrahamwww.iclub.com/support

InvestEd 2007

Orange County, CA

© Copyright 2006-2007 ICLUBcentral Inc. – All rights reserved

Acknowledgement

This presentation was developed by Dan Abraham Director of Technical SupportICLUBcentral, Inc.

Additional material byIra SmilovitzBetterInvesting NJ Chapter aide


Who am I?

Dan Abraham– Director of Technical Support


Congratulations!

You have been elected Treasurer of your investment club


Unfortunately…

You have been elected Treasurer of your investment club


…do that!• How do I know?

• This section tells you how to find out if this problem affects your club

Don’t…

• The consequences• If you don’t do anything about the problem, this is

the price you pay• How to fix

• This is what you should do• Get your club back on track


…use obsolete software• How do I know?

• CAO – you’re fine• CA3 – updates automatically• NCA2 or earlier – upgrade!

• The consequences• Not up to date with current tax law• Look forward to refiling your taxes and future upgrade

woes• How to fix

• CA3 – Adjust Settings to check for updates on startup• NCA2 (or 1!) – Contact ICLUB at 617-661-2582

Don’t…


…forget to backup • How do I know?

• Check your hard drive or floppy disk for *.ICF (CA3 or CAO) files.

• Check the date of the file!

• The consequences

• If your computer crashes, your data’s gone

• How to fix

• CA3 – File > Export

• CAO – Utilities > Backup

Don’t…


…forget to enter your monthly valuations

• How do I know? • Check Valuations (or Accounting > Security >

Enter/Edit Valuations). There should be one each and every month

• The consequences• Your unit value won’t change• Any new units purchased will be incorrect• Withdrawn members get paid the wrong amount

• How to fix• Enter a valuation for every month for the life of the club

Don’t…


…enter extra valuations

• How do I know?

• Check Valuations (or Accounting > Security > Enter/Edit Valuations). There should be only one each and every month


• Unit value changes too frequently

• Any new units purchased will be incorrect

• Withdrawn members get paid the wrong amount

• How to fix

• Delete extra valuations

Don’t…


…forget to enter your Allocation

• How do I know? • Check Allocations (or Reports > Allocation of

Income and Expense) There should be one each year prior to this.

• The consequences• You can’t calculate your taxes!

• How to fix• Enter an Allocation for every year for the life of

the club

Don’t…


…forget to file your taxes• How do I know?

• Check your paperwork. You should have tax forms for every year since your club started

• The consequences• Consult your local IRS and state tax offices –

they’ll tell you• How to fix

• File returns, as described on the IRS web site, http://www.irs.gov, and your state’s web site

Don’t…


…forget your Audit Committee

• How do I know? • Check your paperwork. You should have a

signed certificate from your club’s audit committee for each year-end.

• The consequences• None…maybe.

• How to fix• Make yearly audits part of your club’s operating

procedures

Don’t…


…guess about transactions

Don’t…

Money to or from a member?Money to or from a member? Yes Member TransactionMember Transaction

Associated with a security?Associated with a security? Yes Security TransactionSecurity Transaction

Everything else?Everything else? Yes Cash TransactionCash Transaction

No

No


…enter member contributions as income

• How do I know? • Check your members section and view the

transactions. Every deposit should be recorded there

• The consequences• Your members won’t be buying new units• Your taxes will go through the roof

• How to fix• Delete the income transactions and re-enter

them as deposits

Don’t…


…enter member withdrawals as an expense

• How do I know? • Check your withdrawal report. Is the member

there?• The consequences

• The member didn’t leave the club, but their money did! They’ll stay on the books.

• How to fix• Delete the expense.• Enter the withdrawal under the member section

Don’t…


…try to keep all members equal

• How do I know? • Your members get upset if one member has

more units than the others• The consequences

• Headaches for you• How to fix

• Understanding the unit value system• Why "Everyone is an Equal Partner" Doesn't Work by Herb

Barnett - http://www.betterinvesting.org/articles/web/429

Don’t…


…pay out members based on old reports

• How do I know? • Your withdrawal report doesn’t match your

checkbook• The consequences

• You’ll pay out the wrong amount• How to fix

• Print out the withdrawal report• If you paid too little, send them the cash• If you paid too much, enter an adjustment

Don’t…


…withdraw a member on a day with any other transaction

• How do I know? • Withdrawn members show up again on reports

• The consequences• Withdrawn members stay on your reports• May have paid w/d member too much or too little

• How to fix• Delete the withdrawal and re-enter it on a day

with no other transactions

Don’t…


…transfer units from one member to another

• How do I know? • A member wants to give units to another

• The consequences• May violate your Partnership Agreement• May incur extra taxes or penalties

• How to fix• Don’t transfer – withdraw• Either partial or full• Follow with member deposits for the amount

Don’t…


...get fancy if a member dies

• How do I know? • You get a request to transfer units or pay

someone other than the deceased member• The consequences

• May violate your Partnership Agreement• Can expose each of your members to lawsuits

• How to fix• Don’t issue a check to the surviving spouse• Follow your PA to the letter

Don’t…


…enter a stock purchase as an expense

• How do I know?

• Check your Security Transaction History report. Is the stock there?


• The money left the club, but you didn’t get anything for it!

• You won’t be able to calculate your return on investment

• How to fix

• Delete the expense transaction

• Enter a buy security transaction

Don’t…


…enter a stock sale as income

• How do I know?

• Check your Security Transaction History report. Do you still own shares?


• You will be taxed on the full sale proceeds, not the capital gain

• Your taxes will go through the roof

• How to fix

• Delete the income transaction

• Enter a sell security transaction

Don’t…


…invest in unusual securitieswithout weighing the overhead for your Treasurer

• How do I know?

• Does your club own REITs, Partnerships, Royalty Trusts, or real estate?


• More paperwork than you want to handle

• May not be able to use the Tax Printer

• How to fix

• Do your research before you buy – find out the extra paperwork associated with these holdings

• Consider for your personal portfolio instead

Don’t…


…create two separate stocks for separate purchases

• How do I know? • Click on Securities. Are any stocks duplicated?

• The consequences• Unable to calculate return• How do you enter dividends?

• How to fix• Delete the extra stocks• Enter the additional buys under the original stock

Don’t…


…invent ex-dividend dates• How do I know?

• Your 1099-DIV lists different qualified/non-qualified than your club reports

• The consequences• You’ll pay too much or too little in taxes

• How to fix• Go back and fix the ex-dividend dates

For more information: http://www.iclub.com/support/kb/default.asp?page=kb_0539

Don’t…


…hold on to a worthless security

• How do I know? • Look at your valuation report. Has the stock

been worth zero for several months running?• The consequences

• You’re not realizing the loss• How to fix

• Contact your broker to sell the stock• Truly worthless? Enter the sale in the software

• Sell for $1, commission of $1

Don’t…


…forget the fractional shares • How do I know?

• Your mergers, splits, and spinoffs never come out right

• The consequences• The amount of stock you own with the broker

doesn’t match what you have in the software• How to fix

• Cash in lieu is for the sale of fractional shares.• When you get cash in lieu, include the entire

amount of the stock, including the fraction

Don’t…


…confuse a Money Market Account with a stock

• How do I know? • You enter deposits as buys for $1/share• You enter withdrawals as sales for $1/share

• The consequences• Confusion with qualifying dividends• Many extra transactions on Schedule D of your tax return

• How to fix• Make a new Cash account called Money Market• Sell the Money Market stock at $1/share, putting the

money from the sale into Money Market acct

Don’t…


…mix up deductible and non-deductible expenses

• How do I know? • Edit an expense you’ve entered and ask yourself

“Is this necessary to operate as a club?”• The consequences

• Over- or underpaying your taxes• How to fix

• Edit the expense. If it is necessary for your club, select deductible.

For more information: http://www.irs.gov/pub/irs-pdf/p550.pdf

Don’t…


…try to apply club expenses to a single member

• How do I know? • You try to enter an expense for one person

• The consequences• The money gets taken from the entire club

• What about a bounced check?• It’s a club expense• Enter the member’s reimbursement as a fee

Don’t…


…(ab)use Petty Cash• How do I know?

• (NCA2) Do you use PC for deductible expenses?• Do you use PC to pay your operating expenses?

• The consequences• You’re paying too much in taxes• You’re doing far too much work

• How to fix• (NCA2) Use PC for non-deductible expenses• Don’t keep a separate cash account for operating

expenses

Don’t…


…collect fees to offset an equally-allocated expense

• How do I know? • You have an equally-allocated expense and a fee

matching that expense• The consequences

• Newer members are unfairly burdened• How to fix

• Keep the expense as equally-allocated• Delete that fee, make it a payment instead

For more information: http://biwiki.editme.com/ClubAccountingAvoidTheDoubleWhammy

Don’t…


Make it easy on yourself• Have an assistant Treasurer

• For additional security, break up duties• Train the club members• Use the same valuation date every month• Limit the days members can deposit• Use consistent and fair rules for withdrawals• Use the wizards

…but please DO


Where to get accounting help• ICLUBcentral Technical Support

• http://www.iclub.com/support

• Accounting Manual• The Handbook for Investment Club Accounting

• Local Chapter contacts• Treasurers List

• http://lists.betterinvesting.net/read/?forum=club-treasurers

• BI Wiki• http://biwiki.editme.com/


Where to get software help• Software manual

• http://www.iclub.com/support/downloads.asp

• ICLUBcentral Technical Support• http://www.iclub.com/support

• 617-661-2582 (9:30 AM to 6:00 PM Eastern Time)

• Treasurers List• http://lists.better-investing.org

• BI Wiki• http://biwiki.editme.com/

• Local Chapter contacts


Technical Support• ICLUBcentral’s Technical Support handles all your

accounting and software questions

• Must have two items• A licensed Club Accounting product • An active Maintenance Contract

• Software updates• Online Stock Quotes• 12 months of Technical Support


Technical Support• Web-based Support

• www.iclub.com/support• Telephone Support

• 617-661-2582• 9:30 AM to 6:00 PM Eastern Time• Monday through Friday

• Renew your Maintenance Agreement • Call ICLUBcentral at 1-617-661-2582


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Seminar ID: IE7121

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© copyright 2006 iclubcentral – all rights reserved don’t do that! by daniel abraham invested...

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