In general

  • 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 a printed or electronic version of this document for reference; this is also available as a link in Chromebooks.
    • Note: Do not use Pub 4012’s “Scope of Service” section (pages v through xxi); it differs slightly from the Tax-Aide Scope Manual. 
  • Also out-of-scope are certain high-income tax returns: 
    • [1] The additional Medicare tax on earned income or a net investment income tax [Schedule 2 Line 11, from Form 8959] applies when modified adjusted gross income (MAGI) exceeds $250,000 for MFJ, $125,000 for MFS, and $200,000 for the other filing statuses. Schedule 2 Line 11 is out-of-scope. 
      • 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). 
    • [2] If the taxpayer has any (net) business income [Schedule 1 Line 3], the maximum is even lower – if adjusted gross income (AGI) less the taxpayer’s standard or itemized deductions exceeds $182,100 for any filing status other than MFJ, for 2023, then the return is out-of-scope because of the complications of calculating the 20% Qualified Business Income (“QBI”) deduction.
    • There are further nuances to when high-income returns are out-of-scope.  See page iv of https://ta-nttc.tiny.us/Scope-Manual for details.
    • Note: It is not appropriate to spend time preparing a return simply to determine if a threshold has been reached (if so, preparer’s and taxpayer’s time has been wasted). If the AGI appears close to the threshold, the taxpayer should be advised that s/he needs to go to a paid preparer or use tax-preparation software.
  • TaxSlayer can not handle federal tax returns involving bona fide residents of Puerto Rico who moved to the United States in the tax year and have income earned in Puerto Rico or have a Puerto Rico pension to which the taxpayer contributed. Thus, such returns are out-of-scope.  
  • When something is out-of-scope, there are two possible ways of dealing with it: 
    • If the issue involves something that must be reported on a tax return, then advise the taxpayer that Tax-Aide can’t prepare the return.
      • For example, rental income must be reported, even if the taxpayer can claim a loss [the tax return is required to document the claimed loss], but rental income from a building is out-of-scope.
    • If the issue involves something optional – for example, the deduction for a Simplified Employee Pension (SEP) plan (Schedule 1 Line 16), then the taxpayer has a choice:
      • (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 on the second or third page of Intake Booklet.
        • Be aware that it is not an option to omit expenses on Schedule C, because omitting information from a tax return cannot legally be done if that omission benefits the taxpayer. [Increasing the 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-preparation software themselves, particularly where the option involves significant dollar amounts. You must advise the taxpayer of this choice.

Preparation of a return that is out-of-scope

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

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

Other critical issues

  • 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 are not 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 not certain that a complete and accurate return can be prepared, taxpayers should be referred to another counselor or to another site, or to a paid preparer. Alternatively, taxpayers may elect to prepare their own returns, using either free software (see irs.gov/filing/free-file-do-your-federal-taxes-for-free) or purchased software.
    • The IRS maintains a list of federal tax preparers with credentials and select qualifications, such as enrolled agents, at irs.treasury.gov/rpo/rpo.jsf ; this is searchable by credential and location (zip code.)
    • The California Society of Enrolled Agents (csea.org) has a search page - findanea.org - to locate nearby EAs.
  • 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 15)
    • 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
    • Injured spouse allocation (Form 8379) 

CA policy: California scope

  • For full-year residents of California, a CA tax return (Form 540) will always be done when a federal tax return is done, unless the taxpayer has already filed a CA return, for example by using the FTB’s free CalFile service.
  • For part-year residents and for those not residing in California but having income sources in the state, the required form for state filing, CA Form 540NR, is out-of-scope. 
    • A site is allowed to prepare only the Federal return in such cases if the State Coordinator sets policy to allow this. Otherwise the federal return is out-of-scope as well. 
  • For a taxpayer who was a non-resident of California for the entire year, the federal return is in-scope. If the state where the taxpayer resided does have a state income tax, the taxpayer must be advised of their responsibility to file a state income tax return for that state, if a state return is required for that taxpayer.
    • Having Tax-Aide do the federal return makes sense if the taxpayer can do the state return themselves. But if a paid preparer must be used for the state return, the paid preparer almost always will do the federal return (again).
    • Document this discussion in a note (page 8) and on page 1 of the taxpayer’s Intake Booklet.

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