| ICLUB Insider |
January 24, 2007 |
THE LATEST NEWS ON
INVESTING SOFTWARE BUILT BY ICLUBCENTRAL INC.
Summary
We've received notification from the IRS and several state agencies that Final forms for the 2006 tax year will be available shortly. As soon as we receive them, we'll work as swiftly as possible to load the finalized tax information into the Club Tax Printer software. At such time, you'll be able to access the Final forms via the Auto-Updater function in Club Accounting 3 (if you use Club Accounting Online, the software will update automatically).
Until then, all Tax Printer software will continue to only include Draft forms.
Club Accounting 3.1 software can be purchased as either a download or as a pressed CD -- now shipping.
Club Accounting Online Tax Printers will be accessible under the Taxes tab on your myiclub.com website following purchase.
For help with ICLUBcentral's Club Accounting products, contact our Support team.
Because there was a confusing process for Distribution in the past, Treasurers became used to distributing units at the end of the year, even if they didn't understand why they were doing it. To remove confusion, we changed the name to "Allocation of Income and Expense", removing the term "Distribution" entirely.
The short form is that units should not be distributed at the end of the year. This is a break on how it's been recorded in the past, it's much simpler, and it's proper accounting.
Now for the history. In the past, both the number of units owned and unit value changed at the end of the year, after running a Distribution of Earnings. This practice started before computerized accounting programs with the accounting manual put out by NAIC for investment clubs. It was not a well thought out procedure and has caused nothing but confusion since.
The idea was to mimic mutual funds, who pay out all their earnings annually, and whose shareholders (mostly) reinvest those earnings back in the fund. Unlike mutual funds however, Investment clubs, do not have to pay their earnings out each year. Moreover, the members are taxed on those earnings whether paid out or not.
So, in their attempt to mimic mutual funds, NAIC caused additional units to be 'distributed' to each member. But then, because a member's value does not change simply because taxable income has been allocated, they were forced to make an offsetting adjustment to the unit price. In the end, members ended up with more units, which were worth less per unit, and exactly the same total value as before!
This was a needlessly confusing exercise. There were other adverse ramifications. If the club suffered a loss for the year, units were taken away. Also, it was confusing to have the unit value of the club go down, when the club had experienced earnings for the year.
Should you want to change how units and unit value are handled at the end of the year, the settings are available:
Club Accounting Online
Go to UTILITIES > ALLOCATION SETTINGS On the second item, the pull-down menu lists the year you would like to start using the new, simpler allocation method instead of the old, confusing distribution method. Change that to the tax year you're running the distribution for. For example, this year, change it to 2006. Re-run your Allocation of Income and Expense by selecting UTILITIES > ALLOCATE INCOME AND EXPENSES. Select 2006 for the year, then click YES.
Club Accounting 3 for the Desktop
Go to TOOLS > SETTINGS Go to DO NOT DISTRIBUTE UNITS AT END OF YEAR STARTING FROM and select 2006, if it is set to a date in the future. Re-run your Allocation of Income and Expense by selecting TOOLS > ALLOCATE INCOME AND EXPENSES. Select 2006 for the year, then click OK.
Are you the education officer for your club? Are you
teaching a class at an upcoming meeting or event? Do you
need investor education materials and software?
If you answered "yes" to any of those questions, then visit
our Training page on the ICLUBcentral website. All from
one convenient online location, you can now access
everything you'll need to put on a successful class or
educational event.
Need us to set you up with a demo club for a Club Accounting
Online workshop? No problem. Want a guest speaker at your
event? We'll check our schedules. Don't feel like making
your own PowerPoint presentation? We've got tons of 'em.
Just fill out an Event Support Request and we'll contact you
to work out the details.
Plus, by accessing our Training page, you'll become an
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© Copyright 2007 ICLUBcentral Inc. All rights reserved.
Some ICLUBcentral products use the investing methodologies of BetterInvesting, a national nonprofit organization dedicated to investor education. BetterInvesting assumes no liability or obligations with respect to the investment education information or other content presented in the ICLUB Insider. For more information on BetterInvesting, please visit http://www.betterinvesting.org.
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