Some recent support requests indicate a need for a few reminders of preventive maintenance procedures for club accounting records. One of the most time-consuming and often frustrating jobs is tracking down entry errors that occurred at an unknown time in the past. Fixing these errors may trigger filing amended tax returns. It’s best to catch entry errors quickly before they become large problems.
A good start is to have a regular schedule to reconcile your records with the records of your broker and other financial institutions. Ideally, this should be done monthly as you receive statements, but even quarterly is helpful. Frequent reconciliation helps spot any errors quickly and prevents them from growing. Also, informing club members of these reconciliations helps keep all members involved with the club records.
Next, when was the last audit of the accounting records? Many clubs have a trusted longtime treasurer and often overlook audits. Even experienced treasurers can make a mistake. Audits get extra eyes on the records to spot possible issues. An audit at least annually is a good practice. A checklist for conducting an audit is available to download in the Club Hub section of the ICLUBcentral website.
If your club doesn’t have an assistant treasurer, consider training an assistant or recruiting a former treasurer for the job. This is another way to have more eyes on the books to spot possible errors before they become big problems. The time spent training assistants also helps educate club members on club operations.
BetterInvesting local chapters may offer treasurer training via in-person or webinar sessions. Be sure this includes tax-filing requirements and software operation to generate needed tax returns and member information schedules.
Although only specific members can make accounting entries with the myICLUB.com accounting platform, all members can view accounting transactions and generate reports. If your club uses this platform, encourage members to use the reports and view transactions to help keep the books in order. This may have an additional benefit of demystifying the record-keeping process and making it easier to share the treasurer duties.
A very big problem to avoid is filing late tax returns. The Internal Revenue Service can impose large penalties. The current rate is $195 per member per month for up to a maximum of 12 months. A good way to avoid this is to have a checklist of filing requirements with the deadline for each. Avoid the common error of not having a partner sign the return.
An unsigned return isn’t considered properly filed even if mailed by the deadline. Be sure to get proof of mailing when sending the club tax return. Registered mail is specifically mentioned in the tax code as proof of mailing, while certified mail and other methods are mentioned in IRS regulations. I’ve seen a small uptick in clubs contacted by the IRS for late filing.
Letters from the IRS mention the date the return was received by the IRS rather than the mailing date when assessing penalties. The tax code states mailing a complete return by the deadline is considered filing by the deadline. Proof of mailing will make removing any fines much easier.
A little off-topic but an important reminder — the partnership-filing deadline is March 15, 2017, for tax year 2016. That’s a month earlier.
To avoid small errors from growing, reconcile your records frequently with your financial institution statements, have a regular audit schedule and get more eyes on the books to help spot errors. Consider establishing a checklist of monthly, quarterly and annual procedures to check your records.