1. Welcome! to the Year End Processing Guide Review for Online Credit Unions Presented by the Client Service & Education Team Host: Ellie Barton Harding ~ Education Coordinator

2. Year End Processing Guide Review

3.  For your convenience, our detailed 2014 Year End Processing guide is available on our website.  To access the guide: http://cunorthwest.com/end-of- year/  Reference tab  End of Year

4. What’s New for 2014?  IRS has announced new HSA limits for 2015.  If your statement print vendor is not The Masters Touch and you would like to use substitute 1099-INT forms, call your vendor to verify whether they can process substitute 1099-INTs.  Private Mortgage Insurance (PMI) premiums are no longer reported and will not appear on the 1098 form. See Page 27 for more information.  Due to year-end dates, Beginning-of-Year/Tax File Verification reports should be reviewed on January 2 to ensure all deadlines are met. See Page 39.  When generating 1099-INT/substitute 1099-INT forms, we will now ignore the “Report dividends to IRS” flag on IRA and HSA products since those dividends are not reportable.  When closing the general ledger for year-end, you are no longer required to move the “Current processing year/month” back to Dec 2014 from Jan 2015 in order to post the year-end journal entry generated during Step 4. See page 43 for more information. Page 4

5. Other Reminders  Verify dividend rate changes  Important – Assign year-end tasks as soon as possible so deadlines on pages 6 and 7 of this booklet are met.  Don’t forget to enter Mortgage Insurance Premium data prior to year end!!  Deadlines refer to 8 p.m. EST on the deadline day.  Ascensus-administered IRA programs – Credit Union’s must notify Ascensus with instructions. Page 4-5

6. Other Reminders cont’d  No need to call!! CU*Base Alerts will be sent when transmission of data is completed.  IRA/HSA balance file verification – Set aside time during the first week in January. Don’t wait until after year end!  We recommend monthly or at least quarterly verifications.  In-house eDOC server – Please review the detailed instructions on page 5 for archival of your tax forms. Page 5

7. 2014 Task Checklist  Remember this checklist is for many teams in your organization! We recommend sharing this timeline with the everyone involved in any of these processes. Page 6 -7

8. Tax Form Information  Tax form quick reference section  Alternate Addresses – printed on tax forms/member names come from Master record  DBA Names – never printed on tax forms  Tax form pricing  See pricing information in booklet.  Blank forms – www.irs.gov.www.irs.gov  Archival forms on CD – pricing in booklet. Page 8-9

9. When Using Member Statements as Substitute 1099-INTs Deadline! Complete CU*Base Tax Instructions Screen – Deadline passed 11/21/14 Statement Message Instructions – 12/5/2014 Page 10

10. Statement Message Instructions – When Using Member Statements as Substitute 1099-INTs  Printing Costs - detailed information regarding the printing of substitute 1099-INT information on member statements can be found on the bottom of page 10 Page 10

11. Statement Message Instructions – When Using Member Statements as Substitute 1099-INTs Points to remember  Remember that IRS regulations prohibit the use of any marketing-related messages on the statements.  Either clear all messages or insert generic text ONLY about the substitute 1099-INT. See page 13 for more details.  If using a Statement Printer other than The Masters Touch– verify they can process substitute 1099-INT forms. Page 11

12. Envelope Requirements – When Using Member Statements as Substitute 1099-INT’s  Must be marked “Important Tax Information Enclosed”.  The Masters Touch Clients – instruction insert and envelope notation will be handled for you. Pricing can be found on Page 9.  CU’s that use a different statement processor will need to contact the statement vendor directly. Page 11

13. Statements – When Using Member Statements as Substitute 1099-INT’s  1099’s are generated by Account Number.  Members with two separate memberships using the same SSN will receive a separate 1099 for each membership.  Generated for “Active Accounts” and accounts that were closed accounts during the final statement period.  Will be printed for every member even those with $0.00. Page 11

14. Information on the statement– When Using Member Statements as Substitute 1099-INT’s  Substitute 1099’s - applies to substitute 1099–INTs only! (Not 1098 or any other 1099 information)  Information must all print on the same page of the statement  If the entire form does not fit on the last page of the statement, another page will be generated for that membership. Page11

15. For Credit Unions Offering E-Statements – When Using Member Statements as substitute 1099-INT’s  You will need to make sure that members understand:  They will not receive any forms in the mail.  They must view their year-end statement through online banking in order to see the 1099-INT information. See page 14 for details. Page 11-12

16. 2014 Conversions If your credit union “converted” to CU*Base during 2014, you may NOT use your year-end statements as substitute 1099-INTs. Page 12

17. Need More Information? Please refer to the IRS Publication 1179 “General Rules and Specifications For Substitute Forms 1096, 1098, 1099, 5498, W2-G and 1042-S.” www.irs.gov Page 12

18. Special Instructions for CU’s Offering E-Statements Deadline! Preliminary Alert Message – November or December Modify e-statement notification message for December during December Page 14-15

19. Messages – For CU’s Offering E-Statements  If your Credit union offers E-Statements  Suggested messages and detailed information  An Alert Message should also be added to your website.  Modify e-statement notification messages before month-end Page 14-15

20. Information for recipient – taken from the back of a standard 1099-INT form  This sample PDF was taken from: http://irs.gov/pub/irs- pdf/f1099int.pdfhttp://irs.gov/pub/irs- pdf/f1099int.pdf  The Masters Touch uses this same text for the instructions that will be inserted with your statements Page 16

21. End of Year Statement Audits  If your credit union uses The Masters Touch for your statements and has an Audit Run planned  Special envelopes must be ordered  Contact the Masters Touch no later than 12/12/14  509-326-7475  Insert Due Date is earlier than normal – 12/27/14 Page 19

22. Setting 2015 Holidays  Configure your credit union business days  Using the standard Federal Holidays or  Update/Customize your business days  Updates are performed MNCNFD #23 Please do not change the processing days without contacting CU*Answers Page 20

23. Verifying Loan Categories Page 21 Deadline! Before December 12th

24. Verifying Loan Categories  Loan Category Configuration!  Mortgage and equity loan categories must have the “Send 1098 tax form” field checked  Before changing loan category configurations – contact the Client Service Team Page 21-24

25. Verifying Loan Categories  1098 forms are not generated for less than $600.00  Your CU can choose to send a form for amounts under $600.00 – operations@cuanswers.com  Exception: Student Loan Categories  Do not check the 1098 flag on these categories  Student Loan Categories have a Process Type of “P” which will cause a 1098-E to generate. Page 21-24

26. Verifying Loan Categories - cont.  Run the Loan Category Configuration Report – MNCNFX #18  1098 Reporting for Rewritten loans  Must report interest & points paid on mortgages totaling greater than $600.00  To combine your YTD Interest Paid you need to update the loan(s) using MNUPDT #2  For Mortgage Points and More – see page 27 Page 22-24

27. Updating Tax File Data Page 25 Deadline! If using Substitute 1099-INTs – 12/31/14 If not – 01/06/15

28. Updating Tax File Data – cont.  Print a final copy of the 1099/1098 Tax Information Report after all changes are made - MNRPTF #1  If you make changes after your tax file deadlines - corrected paper forms must be generated by the credit union and sent to the member  Updates to the member’s tax file are performed using MNUPDT #18  Refer to page 53 to learn more about the tax file Page 25-29

29. Updating Tax File Data - cont  Page 26 – Screen shots detailing the property tax paid field  Page 27 - Special Note – IRS Regulations for 2014 result in removing PMI premiums from the 1098 forms  We have changed the 1098 vendor print file so vendors can choose to print ‘Property Tax Paid’ – Included for Sage Direct forms.  If using other vendors, updated files have been sent, please contact those vendors for details on their plans. Page 25-29

30. Verifying Share & Certificates Products – for 1099-INT Reporting Page 30 Deadline! 12/12/2014

31. Verifying Share & Certificates Products - cont.  Printing reports for this process can be done on MNCNFX # 16 & 17  You will be verifying the flag ‘Report Dividends to IRS’  Important! – If settings are incorrect, an additional fee will be charged for additional runs of your forms!  For Credit Union memberships – update the Foreign Citizen Flag and Dividend Post Code Page 30-32

32. Verifying A/P Vendors – for IRS Reporting Page 33 - 34 Deadline! Perform before 12/12/2014 – Verify the setting of the ‘Create a form 1099-MISC year end ’ flag. Between 1/1/2015 – 1/6/2015 – Verify the amount shown in the ‘Previous year 1099-MISC amount’ field

33. Verifying A/P Vendors - cont.  Verify the Account Payable vendor records  Verify the setting of the ‘Create a form 1099- MISC year end ’ flag.  Verify the amount shown in the ‘Previous year 1099-MISC amount’ Page 33-35

34. Month-End Verifications  Perform your monthly verification of member data for share and certificate dividends, loan interest, fee postings and other misc. monthly verifications  Refer to the separate Month-End Processing Verification Booklet Page 36 Deadline! After End-of-Year Processing for 12/31/2014

35. Month-End Verifications - if your rates will change at Year-End  Making changes to your Savings or Checking rates?  Plan to review any changes made the morning after they are scheduled  Run the Share Dividend Configuration Report from MNCNFX #17  Rate changes occur during end-of-day processing Page 36

36. Annual Statement Preparation Page 37 Deadline! 12/5/14 – update your statement message! 12/27/14 – inserts delivered to The Masters Touch

37. Annual Statement Preparations – cont.  Remember that ALL member will receive a statement regardless of activity!  As a result, your total page count for statements will be higher at year-end Page 37-38

38. Beginning of Year – Tax File Verification Reports Important!  Review your Beginning of Year Tax File reports on January 2  Reports are generated on January 1 and archived in CU*SPY under ‘End of Month’ category Page 39 - 40

39. Fair Market Value for IRA’s to Members & the IRS  If your credit union is Ascensus-Administered and has also made arrangements for Ascensus to provide duplicate Fair Market Value to your members, CU*Answers will send this file after January 6, 2015  If your CU is self-administered, the Fair Market Value will be reported on your Y/E members statements Page 41

40. Updating the IRA and HSA Balance File Limits  If your member has an existing IRA or HSA at end of this year, CU*NorthWest will automatically create the 2014 balance file and set limits as published by the IRS  If you have members with special limits, you can maintain them anytime during January  New limits for HSA’s for 2014  Manual adjustments for special circumstances can be done after Year-end. Page 42

41. General Ledger Year-End Closing Instructions  If your CU wishes to perform this process, steps are detailed on pages 43-48  If your CU would like CU*Answers to close your books for you, contact SRS Bookkeeping Services at ext. 277 Page 43 - 48

42. Verify the IRA/HSA Balance File Page 49-53 Deadline! 1099 Distributions 1/6/2015 5498 Contributions 4/15 – 4/18

43. Verifying the IRA/HSA Balance File – cont.  Verification should already be taking place – Monthly or Quarterly  Verify using reports generated in MNRPTF #9  Update records:  In MNUPDT #16 – ‘Update IRA/HSA Trans Post Codes’  Or #17 –’ Update IRA Balance Information’  And #19 ‘Update IRA Beneficiary Info’, > F15 Distributions. Page 49-53

44. Verifying the IRA/HSA Balance File – cont.  Please review this section as some information will need manual input.  Run another report for your records after all updates  Special note to Credit Unions Converted During 2014  IRA Balance File is what is reported for members Page 49-53

45. Verify the Tax file and printing the 1099/1098 Tax Info Report Page 54 - 56 Deadline! Prior to Printing1/6/2015 Prior to reporting 02/7/2015

46. The Tax file and printing the 1099/1098 Tax info Reports  Your credit union is responsible for reviewing the accuracy of the data that will be used to produce forms and report to the IRS.  Print the 1099/1098 Tax Info Reports from MNRPTF #1 & #2 Page 54-56

47. Ascensus Administered – 1099-R/1099-SA and 5498/5498-SA, ESA Page 57 - 58 Deadline! 1099-R/1099-SA reported after 1/6/2015 5498/5498-SA final changes between 4/15 – 4/18 All 5498 reporting to IRS by 6/2/2015

48. Ascensus Administered – 1099-R/1099-SA -cont.  1099-R and 1099-SA Instructions are on page 57  If your CU’s IRA or HSA programs are administered by Ascensus, you can choose to have CU*NorthWest report the 1099-R distribution data  1099-Q information for **(Coverdell Education IRA’s cannot be submitted to Ascensus via a file!)  Run the 1099/1098 Tax Information Report using MNRPTF #1 Page 57

49. Ascensus Administered – 5498/5498SA, ESA – cont.  5498/5498-SA page 58  Run the ‘IRA Govt./ Report / 5498 – MNRPTF #7’  Updates are performed MNUPDT #16 and #17  Final adjustments for IRA and HSA Balance Files must be done before 04/18/2015 Page 58

50. Self Administered 5498/5498 SA, ESA Page 59 Deadline! 5498/5498-SA final changes between 4/15 – 4/18 All 5498 reporting to IRS by 6/2/2015

51. Self Administered 5498/5498- SA, ESA– cont.  Verify IRA contributions using MNRPTF #7  Updates are performed using MNUPDT # 16 and #17  Remember members have until April 15 th. 2014 to make contributions for 2014!  Final adjustments to the IRA and HSA Balance file must be done before April 18 th, 2015 Page 59

52. Questions? http://cunorthwest.com/end-of-year/ 2014 Year-End Processing Guide – for Online Credit Unions Thank you for attending our Year-End Guide Review! Presented by: Client Service and Education Team