Prepare for End-of-Year Reporting & 1099s (webinar slides)

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PowerPoint Presentation

2016 AppFolio, Inc. Confidential.

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AppFolio End of Year Preparation November 2016

2016 AppFolio, Inc. Confidential.

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Audio Check

Select Telephone or Mic & SpeakersTelephone Dial phone number, access code, and audio pin

Mic & Speakers Make sure speakers are on and volume is up

2016 AppFolio, Inc. Confidential.

You have 2 options for listening to this webinar. if youre dialing in - use the access code and audio pin. If you choose to switch from telephone to mic and speakers please make sure your speakers are on. 3

Ask Questions!

Type your questions in the Chat box

2016 AppFolio, Inc. Confidential.

Panelists will be answering questions in the chat box and we will try to leave some room at the end for questions as well4

Hello!Jake SchlingmanTraining Manager

Q&A Panelists: Katie RudolphBreigh CavenderMorgan Fredricks

Todays Presenter:

2016 AppFolio, Inc. Confidential.

(Jake) Hello everyone and thank you for joining us for todays webinar on Managing Associations in AppFolio

My name is Jake and Im the Training Manager for the Services Department here at AppFolio. Ive been with the company for about 3 years now and Im excited to walk you through the year end process.

Joining me are Katie, Breigh, and Morgan who will be answering questions entered into the chat box.

Time: Approximately 60 minutesWebinar is being recordedFollow-up Email: Link to recording and slides within 48 hours

Details

2016 AppFolio, Inc. Confidential.

The meeting today should last about 45 minutes

The webinar is being recorded so anyone who is registered will receive an email with a recording of the webinar within the next few days. 6

AgendaUnderstanding AppFolios EOY ProcessReview and Update Information and SettingsGenerate Reports and Send 1099sFAQsComing Soon!

2016 AppFolio, Inc. Confidential.

Todays Agenda:

Were going to start by talking about AppFolios end of year process to help you understand what the system is doing for you and how it is calculating the numbers you see. Then, we will discuss some information and settings for your owners and vendors that youre going to want to make sure is accurate and up to date. Next, were going to go over what reports to look at to verify your 1099 numbers, how to batch print those reports, and how to send 1099s when youre ready to do so. Lastly, were going to go over some frequently asked questions.

End of Year Preparation Poll #1What have you done to prep for year end?

Checked tax settings for owners, vendors & PM co.Reviewed ownership dates & vendor 1099 payersRun financial reports to verify owners 1099 totalsGotten owner consent to only send 1099s electronicallyNothing yet

2016 AppFolio, Inc. Confidential.

Before we jump in, lets do a quick poll to see where you are currently at with your End of Year Prep. Please check off all of the options that apply to you.

Looks like a good number of you have started but for those of you who have not started yet dont worry, were going to go over all of the things you need to do to be ready for tax season in this webinar. 8

Understanding AppFolios EOY Process

2016 AppFolio, Inc. Confidential.

Alright so first up is understanding AppFolios End of Year process. Lets take a peek behind the curtain to see what the system is doing to make your lives easier.

What Happens at Year-End?Soft journal entry to close books - Return income and expense account balances to zero ($0.00)Done after month chosen as the Fiscal Year End on property pageOn Balance Sheet - Calculated Retained Earnings (this years net income) moved into Calculated Prior Years Retained Earning

2016 AppFolio, Inc. Confidential.

So what does the system do at year end? The first thing that AppFolio will automatically do is whats called a soft close at the end of the fiscal year for each property. For the majority of you, the fiscal year ends in December but, if you have a property where the fiscal year differs from the calendar year, you can designate the fiscal year end month on that propertys page in AppFolio.

So what is a soft close? In a soft close, the system uses a soft or invisible Journal Entry to return your income and expense account balances to zero. This is not a transaction that will show up on your general ledger but if you run the general ledger as of January 1st, youll see that the starting balance for all income and expense accounts is 0.

You can also seen the effects of the soft close on your Balance Sheet Report. There, the soft close journal entry moves your calculated retained earnings, which is this years net income, into the calculated prior years retained earnings, which is the net income of every year before this year.

How AppFolio Calculates 1099sBased on Gross Income 1099 total = Total Operating Income + Prepaid RentAdd prepaid rent GL to Cash Flow! Can mark GL accounts exempt from 1099 reporting if not taxableCan exclude owners by setting a minimum income amount

2016 AppFolio, Inc. Confidential.

The next thing the system does is that it calculates your 1099 numbers for you based on your owners and/or vendors gross income for the year.

For owners, the 1099 number is gross operating income + prepaid rent for the year. The reason that prepayments are included in this calculation is that the IRS has mandated that prepayments be included in taxes for the month they are received rather than the month they are utilized.

This means that if a prepayment comes is collected in December 2016 for January 2017s rent must be included in 2016s taxes even though the money is not being utilized until 2017.

For vendors, the 1099 number is gross amount of checks and/or other payments written out to that vendor for the year.

If you have income or expense GL accounts that are not taxable, youre going to want to go to those GL accounts and mark them as Exempt from 1099 Reporting so that they are not included in this calculation.

You can also exclude owners or vendors by setting a minimum income amount. This defaults to a minimum of $600 but that can be edited when you are generating your 1099s.

Manage Mid-Year Migrations For Owners: Make sure year-to-date income balances were brought forward in ImplementationCan be added with a Journal Entry per property if they were notFor Vendors: If 1099 payer is the Management Company:Make sure 1099 Balance Forward is entered on vendors pageIf the vendor 1099 payer is the owner or portfolio: Vendor 1099s need to be done from both systems (prior and AppFolio)

2016 AppFolio, Inc. Confidential.

If you joined AppFolio this year welcome to the team!

There are a few things youll want to be sure to double check.

First, for your owners youre going to want to make sure you brought forward your 2016 year to date balances in your implementation process. If you didnt do that, youll need to add those to AppFolio by entering in a journal entry on each property that establishes them.

Now for your vendors it depends on how you have the 1099 payer setup. If the 1099 payer is the management company, youll want to ensure that the 1099 Balance Forward is filled in on the vendors page. Note that this field only appears if you went live with AppFolio this year. If the vendor 1099 payer is the owner or set up by portfolio, you will need to do vendor 1099s on both your prior system and AppFolio as we do not have a way to bring forward owner or portfolio specific vendor 1099 balance forwards.

Review and Update Information and Settings

2016 AppFolio, Inc. Confidential.

Now that we have a better understanding of what AppFolios doing on the back end, lets talk about the settings and information required to make that automation work for you.

Verify SettingsProperty Management Company Tax SettingsOwner & Vendor Tax SettingsGL Accounts for 1099 ReportingWho Pays Vendor 1099Property Ownership Dates

2016 AppFolio, Inc. Confidential.

This is a high level list of all of the settings that youll want to verify in order to ensure that your 1099s generate with accurate information.

Property Management Co. Tax Settings

Phone NumberTaxpayer NameTaxpayer IDTransmitter Control Code (TCC) - For FIRE file onlyContact Name - For FIRE file only

Under Company Settings:

2016 AppFolio, Inc. Confidential.

The first thing youre going to want to do is check your company settings. Your company phone number, taxpayer name, and taxpayer ID are all filled into your 1099s so its important that this information is filled out correctly. If you utilize portfolios youll want to make sure this information is correct on those as well.

If youre planning on filing electronically with a FIRE file, youll also need to enter in a transmitter control code, or TCC, along with a contact name. A TCC is a code given to you by the IRS when you register to submit your 1099s electronically and is required for you to be able to file your FIRE file. If you do not have a TCC and you are planning on filing electronically, I encourage you to apply for one as soon as possible. According to the IRS website, you must apply for a TCC no later than 45 days prior to the due date of your returns.

Vendor & Owner Tax Settings

Verify the following for Owners & Vendors: Taxpayer NameTaxpayer IDSend 1099? - Yes or No

2016 AppFolio, Inc. Confidential.

After you have verified your company and portfolio tax settings, the next step is to verify your individual Vendor and Owner Tax settings. On each vendor and owner page, youll need to verify the taxpayer name, taxpayer ID, and whether or not to send a 1099 for this owner or vendor.

GL Accounts for 1099 ReportingConfirm all non-taxable income accounts marked as ExemptSetting on GL Account page Use Chart of Accounts reportGroup by Options column

2016 AppFolio, Inc. Confidential.

After you have verified the information for your company, your owners, and your vendors its time to verify your GL account settings. Youll need to make sure that all of you non=taxable income accounts are marked as Exempt from 1099 Reporting. To do this, youll want to go to Accounting, GL Accounts, and click on the GL account youd like to exempt. On that GL accounts setting page, youll need to check the box next to Exempt from 1099 Reporting.

You can use the Chart of Accounts report to see which GL accounts are exempt without having to click into each GL account. To do this, youll want to customize the report, go to Grouping, and select the option to group rows by Options. This will give you a list of all of your GL accounts and show you what options each one has checked off.

Vendor 1099 Payer on PropertiesSetting is on Property page in Owners and Financials sectionSet as management company, owner or portfolioDefault is management companyIf set to owner or portfolio, you may see multiple 1099s for some vendors

2016 AppFolio, Inc. Confidential.

Now that weve gotten our GL accounts set up, the next step is to make sure we designate the Vendor 1099 payer on our properties so the system knows who the vendor is receiving a 1099 from. You can find this setting in the Owners and Financials section of each property page. You can set the 1099 payer as the management company or the owner. If your property is part of a portfolio, the portfolio will replace the management company as a choice. By default, your properties will have the management company, or if applicable portfolio, set as the vendor 1099 payer.

If your property is set to have the portfolio or the owner as the vendor 1099 payer, the system may generate multiple 1099s for some vendors. This is because with these settings it is giving a 1099 for each owner or portfolio that the vendor received payment from, rather than just one 1099 for the total amount the vendor received from all of your properties.

If you would like to audit your properties to see which ones are owner paid and which ones are management company or portfolio paid, you can do so using the Property Directory Report. Simply run the property directory for all properties and then add the optional column for Vendor 1099 Payer.

Verify Property Ownership DatesCash balances are attached to the property, not the owner

Use New Ownership feature to record an ownership change

Can set a new ownerships start date during or after the change process

2016 AppFolio, Inc. Confidential.

After verifying the Vendor 1099 payer, its time to verify your properties ownerships to ensure that they are up to date and that the effective dates for current and past ownerships are accurate. Its important to remember that cash balances in AppFolio Property Manager are tied to the property, not the owner. Because of this, its very important that ownership periods are accurate so that the system can calculate what portion of income belongs to which owner and which owner paid which vendor bills on a given property.

To set a new ownership, you will want to use the New Ownership feature in the Owners and Financials section of the property page. This will open up a process that will allow you to select the new owner or owners of the property, their ownership percentages, and the ownership start date. If you need to make corrections to the ownership start date on a property, you can do so simply by editing this section.

Reports to Review Owner 1099 InformationOwner 1099 Summary:Includes all hidden properties and owners with taxable incomeClick 1099 total to open Cash Flow report filtered for the tax year1099 total = Total Operating Income + Prepaid Rent

Owner 1099 Detail:Shows owners 1099 totals per propertyShows ownership dates during the tax yearClick 1099 total to open General Ledger filtered for the tax year

2016 AppFolio, Inc. Confidential.

Now that we have all of our settings done, there are a few reports we can use to double check those settings and make sure that the information being displayed is accurate.

For owners, we have the 1099 Summary and the 1099 Detail reports. The summary report shows you a list of all of your owners that have taxable income regardless of whether they are hidden or not, and the 1099 total that the system is generating for each. The 1099 total equals total operating income + prepaid rent. If you click on the amount being shown, it will open up an owner 1099 detail report prefiltered for that owner.

The owner 1099 detail report shows the selected owners 1099 totals per property they own so that you can see how much each property is contributing to the total on the summary report. You can also see the ownership dates for the owner on each property during the tax year. If you click on the 1099 total here, it will open up a general ledger for that property filtered for the tax year so that you can easily investigate any discrepancies you find.

Reports to Review Vendor...

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