Closing the Books: Year-End Checklist for Community Association Managers

Posted by Andrea Drennen, CMCA on December 18, 2015

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*image by Alan Cleaver via Flickr

CAM professionals can be forgiven if you are a bit of a Grinch. It's not that you don't love the holidays. The problem is that the holiday season also marks the beginning of a much less appealing time in community association accounting - Year End.

If you're not in the industry, you may be wondering what the big deal is. After all, doesn't every business need to close their books once a year as well? What makes association management so special? Well, most businesses only have to close their books, process their W-2s and 1099s, and pay their taxes once. But in Community Association Management, not only do you need to close the year for your own company, you need to do it for all of the communities in your portfolio in the same timeframe.

Yep, you may dread it, you may hate it, but you still have to get through it. That's where we come in. This post is a down and dirty guide to get you through year end. We've got deadlines, helpful tips, a handy checklist - everything you need to make it through year end and out to the other side in (mostly) one piece.

Disclaimer: I am not a CPA, I don't even play one on TV. This guide is intended to help you prepare for year-end, but by no means should anything here be used as financial, legal, or taxation advice. If you have any questions, or need assistance completing the year-end process, please contact a Certified Public Accountant familiar with the operation of community associations in your state.

Take Care of Unfinished Business

  • First things first. If you've got anything sitting on your desk that should be handled in December (or earlier), make sure you take care of it first, particularly if it involves financial transactions such as interest income, CD interest, bank service charges, reserve adjustments, or expense adjustments that took place in 2015. Make sure anything that belongs in 2015 goes under 2015 before you try to close the year, because it's a heck of a lot harder to do after the fact.
  • Reconcile all of your bank accounts for all periods in the prior year.
  • Make sure you've got your budget for the new year entered into your system, particularly if the software will automatically carry over budgets, like TOPS.
  • Make a copy (printed or electronic) of all of your financial reports. You should do the last period as well as the entire year. This is going to be one of your most important auditing tools, so it's an important step.
  • Make a Backup of your community data. You'll need this for your records, but it also comes in handy in case anything goes horribly wrong and you need to restore from a backup and start over.

2016_Filing_Deadlines.pngNote that because 2016 is a leap year, these
filing
deadlines have changed from prior years.

1099s

  • Go through your vendor information and make sure you have up to date data for 1099's. You must have an accurate FIN or SSN for every unincorporated vendor (such as sole proprieters and partnerships) to whom your company, or any association in your portfolio paid $600 or more. If you are in doubt whether a vendor is eligible, go ahead and send the 1099.
  • Since you'll be contacting vendors anyway to get your records updated, now is also a great time to request updated insurance information so you have valid liability policy numbers and expiration dates going into the new year.
  • Select the vendors that should receive a 1099.
  • Print a final report of the yearly vendor history for each vendor that performed work for a community in 2015. This report will serve as a record, as well as a useful item to 'proof' the amounts you reported.
  • Print and distribute 1099 forms to all community vendors.
  • If you are not filing copies of 1099s electronically, generate your 1096 transmittal sheets, the 1096 is the summary page that must be submitted for each legal entity, letting the IRS know how many of each 1099 form type you are submitting.
  • Mail the completed package (1096 plus copies of all 1099s) to the IRS. Find the appropriate mailing address on the 1096 form.

W-2s

  • Whether you run your own payroll or pay someone else to do it for you, make sure that all employee information is up to date in your payroll system.
  • Generate a final report of the yearly employee ledger for your permanent records.
  • If you are using an in-house payroll solution, update tax tables prior to processing employee payroll for the first time in the new year.
  • Print and distribute all W-2 forms to employees.
  • If you are not filing copies of W-2s electronically, generate your W-3 transmittal sheets, the W-3 is the summary page that must be submitted for each legal entity, letting the IRS know how many W-2s you are submitting.
  • Mail the completed package (W-3 plus copies of all W-2s) to the IRS. Find the appropriate mailing address on the W-3 form.
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FUTA

  • Even if your company and managed communities did not pay out unemployment benefits in the prior year, you'll need to generate either form 940 (annual) or 941 (quarterly) to report FUTA.
  • If you are using an in-house payroll solution, update unemployment tax numbers for the new year AFTER printing out and submitting form 940 or 941.

Close Your Accounting Year

  • Now the real fun begins. Start by printing a copy of your ledger for the entire year, including a breakdown by cost centers if you use them in any of the associations you manage.
  • Most accounting software packages will allow you to choose if you wish to zero out old balances to keep a clean data set, or if you want to retain your histories to allow you to research the previous year's data throughout the year.

    (If you are using TOPS, you can do make this choice for your General Ledger Histories as well as your owner histories.)
  • In your CAM accounting software, follow the process to close the books for the year. The following tasks should be completed:
    • Close the accounting year, which should carry over the balance sheet account balances while booking the net income to equity and zeroing out the Income and Expense account balances.
    • Update budgets for the new year
    • Update charges for dues and assessments if they were changed in the approved budget
    • Set new accounting periods as necessary
    • Carry over or purge history data from the previous year.
  • If you are also using an in-house payroll solution, you should close out the year there as well, to zero out all YTD balances for employee payroll.
  • If your software has closed period protection, like TOPS, set the protection so it prevents posting transactions to the year just closed.


Whether you are a TOPS user or not, download this handy year-end checklist as a reminder of all of the steps for completing year-end!

Year-End Checklist

For TOPS Users, we recommend you download the 2015 Year End Summary Instructions, which will give you clear instructions on how to perform all of the above actions in TOPS.

TOPS Year-End Summary

 

*Image credit: Tero Vesalainen via Pixabay

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