What Tax-Aide Can and Cannot Do

What Tax-Aide Can and Cannot Do - Scope

The AARP Foundation Tax-Aide Program is limited in scope. Our mission is to provide high-quality free income tax assistance and tax form preparation to low and moderate-income individual taxpayers, with special attention to those ages 50 and older.
The NTTC publishes the Tax-Aide Scope Manual, https://ta-nttc.tiny.us/Scope-Manual, a comprehensive list of which federal tax forms are in-scope and which are out-of-scope. Each site should have printed this document for reference; it’s available as a link in Chromebooks.

Note: Don’t use Pub 4012’s “Scope of Service” section (pages v through xxi); it differs from the Tax-Aide Scope Manual.

1, 2. The additional Medicare tax on earned income or net investment-income tax [Schedule 2 Line 11, from Form 8959] applies for modified adjusted gross income (MAGI) over $250,000 for MFJ, $125,000 for MFS, or $200,000 for all other statuses (2024).

MAGI is defined here as the total of Medicare wages (box 5 of Form W-2s), plus unreported tips (Form 4137, line 6), plus independent contractor income that the taxpayer thinks should have been treated as wages (from Form 8919, which is out-of-scope).

3. If the taxpayer has any (net) business income [Schedule 1 Line 3] and adjusted gross income (AGI) less the standard or itemized deductions exceeds $191,950 ($383,900 for MFJ) for 2024, the return is out-of-scope due to complexity of calculating the 20% Qualified Business Income (“QBI”) deduction.
There are further nuances that make high-income returns out-of-scope: see https://ta-nttc.tiny.us/Scope-Manual page iv
Note: It is not appropriate to spend time preparing a return simply to see if a threshold has been reached (if so, preparer’s and taxpayer’s time has been wasted). If AGI appears close to the threshold, the taxpayer should be advised we can’t prepare the return.

If it involves something that must be reported on a tax return, tell the taxpayer we can’t prepare the return.

For example, income from more than 14 days’ building/room rental must be reported, even if the taxpayer has a loss [the tax return is required to document the claimed loss], but is out-of-scope.

If the issue involves something optional – such as the deduction for a Simplified Employee Pension (SEP) plan (Schedule 1 Line 16), the taxpayer can choose:

(1) Don’t take that option (almost always this will be claiming a credit or a deduction), and have Tax-Aide prepare the return, for free. If the taxpayer chooses this option, document the decision in a note (page 8) and in the Intake Booklet.

Note: It’s not an option to omit expenses on Schedule C! Omitting information from a tax return cannot legally be done if it benefits the taxpayer. [Increasing net income on Schedule C can increase various credits, including EIC, that depend on the amount of earned income.]

(2) Use a paid tax preparer or use tax software themselves, particularly where the option involves significant dollar amounts. You must advise the taxpayer of this choice.

Knowingly going out-of-scope violates Tax-Aide Standards of Professionalism and should be reported to your LC; an incident report must be submitted.

Volunteers who knowingly prepare out-of-scope returns risk the loss of protection from personal liability; they are also subject to counseling and may be removed from the program for failure to follow policy.

The Tax-Aide program only prepares individual tax returns (Form 1040). (Form 1040-SR has larger font and better readability but is otherwise the same.)
Tax returns for other entities are out-of-scope.
Regardless of training and/or certification, if you aren’t confident in your knowledge of forms or issues relating to a taxpayer’s return, you are not to prepare or review that return.
When volunteers are uncertain if a complete, accurate return can be prepared, refer taxpayers to another counselor or site, or to a paid preparer. Alternatively, taxpayers may elect to prepare their own returns; free software is at irs.gov/filing/free-file-do-your-federal-taxes-for-free.

The IRS has a list of federal tax preparers with credentials and select qualifications, such as enrolled agents, at irs.treasury.gov/rpo/rpo.jsf, searchable by credential and zip code.
The California Society of Enrolled Agents (csea.org) has a search to locate nearby EAs, findanea.org.

CA policy: Federal or California returns that require income splitting are out-of-scope, primarily because California is a community property state. Income-splitting is required for:

MFS returns (see limited exceptions, in the Married Filing Separately section, page 14)
Registered Domestic Partners (RDP), in their federal returns, as well as any CA return filed as MFS
Returns of any filing status where a divorce occurred during the tax year, but there was an intact household at any time earlier in the calendar year

Present in California for other than a temporary or transitory purpose, or
Domiciled in California, but outside California for a temporary or transitory purpose, such as work.

Note: The FTB presumes residency if a person spends nine months or more of the calendar year in California.
Note: A person becomes a resident of California when they make it their home versus when they come for a visit.

For full-year residents of California, always file a CA tax return (Form 540) when filing a federal return, unless the taxpayer has already filed for CA, such as by using the FTB’s free CalFile service.
For part-year residents and California nonresidents who have income sources in CA, CA Form 540NR is required, which is out-of-scope.

A site is allowed to prepare only the Federal return in such cases (if the State Coordinator allows it). Otherwise the federal return is out-of-scope as well.