Private Clubs Newsletter

1099 Filing Season Is Upon Us: What Your Club Needs To Know
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As the calendar turns to the New Year, many Clubs are getting ready to close their 2011 accounts. An added task this time of year is the preparation of 1099s for vendors, interest payments to members, and payments to former members for the redemption of their stock certificates. A couple of the common forms of 1099s that are filed by Clubs are discussed in this article. 1099-MISC The most common form of 1099 issued by a Club is the 1099-MISC which is completed for vendors that have been paid $600 or more in rent or services during 2011. Rent payments should be reported in Box 1 of the 1099-MISC. Non-employee compensation should be reported in Box 7. A payment should be reported as non-employee compensation if the following conditions are met: The Club made the payment to someone who is not its employee The Club made the payment for services in the course of its trade or business The Club made the payment to an individual, partnership, estate or, in some cases, a corporation; and The Club made payments to the payee totaling at least $600 during the year.

Some important reminders are that all payments to attorneys in the course of the Clubs trade or business should be reported on a 1099-MISC even if the law firm is incorporated. Generally, payments to corporations are not reported on a 1099-MISC. Limited liability companies (LLCs) are subject to receiving 1099s as they are not corporations. Payments to employees under a non-accountable reimbursement plan (e.g., $1,500 a year for dry cleaning where no receipts are required) is not reportable on a 1099, but should be reported as W-2 compensation for those individuals.

In addition, if a Club offered credits to members for reduced dues or pro shop credits because that member sponsored a new member to the Club, the sponsoring member would be subject to a 1099-MISC if the credits received were $600 or more. The amount would be reported in box 3 Other Income on the 1099-MISC. 1099-B The new Form 1099-B requires the reporting of a members cost basis for covered equities (membership certificate buybacks). A Club will now need to provide a cost basis of membership certificates repurchased from members due to resignation. The new form has several new boxes as well. Box 1b Report date of acquisition Box 3 Report cost or other basis Box 6 Indicate for a "non-covered security" (note the different verbiage on Copy B of the form) Box 8 Report a description of the short or long-term gain

Failure to complete form 1099-B properly may subject the Club to penalties. All 1099s must be mailed to the recipients on or before January 31st (with the exception of the 1099-Bs which are due on or before February 15th). A copy of the 1099s and 1096s, Annual Summary and Transmittal of U.S. Information Returns, must be submitted to the Internal Revenue Service (IRS) on or before February 29th. If the Club cannot show reasonable cause, failure to file a correct information return by the due date may subject the Club to a penalty. The penalty applies (1) if the Club fails to file timely; (2) if the Club fails to include all required information; (3) if the Club fails to report a taxpayer identification number; or (4) if the Club reports an incorrect taxpayer identification number. The penalty is: $30 per information return if the Club files correctly by March 31st $60 per information return if the Club files correctly by August 1st $100 per information return if the Club files after August 1st or does not file required information returns

If any failure to file a return is due to intentional disregard of the filing, the penalty is at least $250 per information return.

Clubs that file more than 250 information returns must file them electronically. In order to get approval to file information returns electronically, Form 4419, Application for Filing Information Returns Electronically, must be filed at least 30 days before the due date of the returns. There is a penalty of $100 per return for failure to file electronically unless the Club can establish reasonable cause. The IRS has introduced a new program this year called Taxpayer Identification Number (TIN) Matching which can be useful in the 1099 preparation process. TIN Matching allows a Club to verify the TIN and name combinations received from vendors with IRS records before submitting the 1099s to the IRS. TIN Matching can be done at the IRS website www.irs.gov Clubs that use TIN Matching are anticipated to receive fewer backup withholding and penalty notices.
About Our Practice: Private clubs operate in a unique business environment. They are constantly challenged with providing optimum quality and service while controlling costs. Private clubs must be aware and ready to react to changes in government regulations, tax laws, operational advancements and member expectations. Our dedicated Private Club professionals include partners, managers and staff with highly specialized experience, education and training. Our team is current on developing trends in the industry which assists our clients achieve their strategic goals for success. Our long history of serving the private club industry exemplifies our commitment to serving this community. OConnor Davies, LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. IRS CIRCULAR 230 DISCLOSURE: To comply with IRS regulations, we are required to inform you that unless expressly stated otherwise, any discussion of U.S. federal tax issues in this correspondence (including any attachments) is not intended or written to be used, and cannot be used, (i) to avoid any penalties imposed by the Internal Revenue Code, or (ii) to promote, market, or recommend to another party any transaction or matter addressed herein. Our firm provides the information in this e-newsletter for general guidance only, and it does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation