The holidays are always a joyful time in which you commune with family members and have a peaceful break the from the corporate world. But, the holiday season also marks a much less alluring time in association accounting- year-end.
If you’re not familiar with the industry you may be wondering what the commotion is all about. Businesses across the nation must reconcile and close their books at least once a year as well. What makes community management that much different? To answer that question, you must consider the fact that most Community Association Management companies have more than one community in their portfolio. Closing the books means you must process W-2s and 1099s for every association that you manage and within the same allotted time frame.
Yes, it’s distressing, but it’s a step you must take in running a successful HOA management company. Clark Simson Miller is here to give you a small guide to help alleviate some of your questions and get you through the year-end.
If you have anything currently in the queue, you must make these items a priority especially if it involves financial transactions such as bank service charges, reserve fund adjustments, CD interest, interest income, or expense adjustments that took place during the year. Anything that belongs in 2015 needs to be finalized before you to try to close the year, because doing so after that fact is a headache for your management company or community association.
- Reconciliation of all bank accounts for the previous periods in the prior year
- Completion of the new budget for the next year
- Copies of all financial reports (printed or electronic) for the previous year. This is an essential component for auditing, so make this a priority.
- Backup all of a community association’s data for records.
- Make sure each vendor that you worked with throughout the year has up to date information for 1099s. All FINs and SSns for every unincorporated vendor (i.e. partnerships and sole proprietors) in which your management company or an association you manage paid more than $600.
- While you are still communicating with the vendors or contractors you worked with throughout the year, you should be collecting up-to-date insurance information and valid policy numbers.
- Compile a list of vendors that will receive 1099
- Print a report for each vendor that performed work for any community in your portfolio over the course of the year. This item will serve as evidence for any amounts you report.
- Print and disperse 1099 forms for community vendors that performed services during the year.
- If you opt to not file your 1099 forms electronically, you need to generate 1096 transmittal sheets, 1096 is a synopsis page that has to be submitted for each legal entity, giving the IRS information on how many of each 1099 form types that you are submitting.
- Mail all copies of 1099s and 1096s to the Internal Revenue Service.
- Whether you do payroll in-house or have a third party handle your payroll, it’s critical to make sure that all employee information is up-to-date in your system.
- Produce a final report of the yearly employee ledger for your company’s records.
- If you handle your payroll in-house or use a software solution, you must update your tax tables before processing payroll for the first time in the new year.
- Disperse W-2s to employees
- In the event that you decide to not process W-2s electronically, you need to produce W-3 transmittal sheets, the W-3 being the summary page to which the IRS can identify and know how many W-2s you are submitting.
- Send out all W-3s and W-2s to the IRS.
Accounting Year Closing
- If there are any associations that use cost centers you will need to provide a breakdown on the final copy of your ledger for the entire year.
- If you use in-house accounting software you will have two options to make a decision on for old balances. You may decide to zero out old balances and keep fresh books and a clean set of data, or you may decide to preserve that data in the event you want to look at the transaction history in the new year.
- In your association accounting solution software, there is a short process to follow in order to close the books for the year:
- End the accounting year, which will equate to the net income becoming equity and the Income and Expense account balances zeroing out.
- Import or input budgets for the new year
- If dues or assessments were changed with the new budget, allocate those changes accordingly
- Update the new accounting periods as required
- Rollover purge history data from the prior year
- Closeout the year for your payroll if you are using an in-house solution. This will in turn zero out all Year-To-Date balances for employee payroll.
If your association needs help with end of year financial reporting or accounting then contact Clark Simson Miller for an overview of our services and more information on how we can benefit your community.