scope november 20091 aarp/tce program and scope what is the mission of aarp/tce? why are we...

Scope November 2009 1

AARP/TCE Program and Scope

What is the mission of AARP/TCE? Why are we concerned about scope? What returns are in scope? Concerns for Tax Year 2009 Class discussion

Slides available on www.w2in.com/aarpDon Priebe [email protected]


Why are we here? Clients Served Types of Service Types of Tax Returns Prepared

References AARP Policy Manual v4.0 (2009-2010) IRS Pub 4491/4555 (TCE Textbook) for TY 2009 IRS Pub 4012 TCE Resource Guide) for TY 2009


AARP/TCE Mission The program’s mission is to provide

high quality free income tax assistance and tax form preparation to low- and moderate-income taxpayers, with special attention to those age 60 and older.


Standard ServiceStandard Service (during the standard

1040-filing season) is provided at sites to low- and middle-income taxpayers with special attention given to those age 60 and older.

Services are provided at sites that are available to the public as well as targeted sites for selected populations such as nursing homes, retirement centers, and VA hospitals.


Shut-in Service Shut-in Visits are provided by

appointment as needed to homebound taxpayers age 60 or older.

Two persons must attend each home visit.

A maximum of 30 miles per round trip will be reimbursed for travel to provide shut-in services.


State Service Non-Federal Service may be

provided as long as priority is given to the target population, and no additional cost is incurred.

We prepare NY returns corresponding to in-scope federal returns.


Why are we concerned about

scope? Assure that accurate returns are

prepared for our clients by limiting our assistance to area in which we are properly trained

Avoid liability for mistakes in areas in which we are not trained


Volunteer Protection Act of 1997, PL 105-19

Exempts a volunteer of a nonprofit organization or governmental entity from liability for harm caused by an act or omission of the volunteer on behalf of such organization or entity if:

the volunteer was acting within the scope of his or her responsibilities at the time;

the volunteer was properly licensed or otherwise authorized for the activities or practice in the state in which the harm occurred;

the harm was not caused by willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed;

the harm was not caused by the volunteer operating a motor vehicle, vessel, aircraft, or other vehicle for which the state requires the operator or owner to possess an operator’s license or maintain insurance.


Policy of the AARP Program

Counselors must only deal with tax-related topics on which they have received IRS or AARP Tax-Aide training and certification.

Counselors must refer taxpayers with complicated or complex tax returns, which involve matters outside the scope of their training, to professional tax preparers or to the IRS. No specific paid preparer or business can be named

Counselors may deny service if they feel that the person is providing misleading tax information or refer service if the Counselor does not feel qualified on a particular tax law issue(s).


So what is in scope?? The AARP/TCE training covers most of

the commonly used individual income tax forms.

It covers only simple business ventures reportable on Schedule C-EZ.

It does not cover rentals. It does not cover complex

investments.


Individual Returns Only Includes 1040, 1040EZ, 1040A Does not include 1040NR Include 1040-X (new form this year) No non-individual returns

1041 Estates and Trust 1120 Corporate 1065 Partnership 990 Exempt Organization


Pub 4012 has a two page chart on what is “in-scope”


In Scope Income Items

Wages Dividends and Interest * Taxable refunds Alimony received Simple businesses (Sch C-EZ) * Schedule C out of scope Simple capital gain/loss *

* details to follow


In Scope Income Items (continued)

Sale of business property (4797) out of scope

Pensions / IRA distributions * Rents and Royalties mostly out of scope * Farm Income out of scope Unemployment (new rules this year) Social Security Some other income *

* Details to follow


Interest and Dividends Reported on 1099-INT or 1099-DIV Reported on K-1 or equivalent Taxable, tax-exempt, Fed/NY split Foreign taxes paid (but no 1116) Caution – For Liquidation

distributions see Schedule D


Business Income

AARP/TCE only supports Schedule C-EZ Shows a net profit Less than $5000 in expenses No inventory No depreciation No office in home Only one business per taxpayer


Capital Gains and Losses

Mutual fund CG distributions Investment trades with basis information Capital gain from K-1s (new in-scope) No straddles, mark-to-market, etc. Sale of principle residence Cancellation of debt on principle

residence (new in-scope) No installment sales


IRA and Pension Normal IRA and pension distributions IRA rollovers Premature distributions with penalty Charitable donation of IRA funds No 8606 No 5329


Rents and Royalties

The only thing in scope is rents and royalties received, documented on a 1099-Misc, with no corresponding expenses.

The more common real property rentals with depreciation and/or other expenses are out of scope.


In Scope Other Income

Gambling winnings (with or without withholding)

Jury duty, election pay Contests, prizes NOT cancellation of debt


1040 In Scope Adjustment Items

Educator expense SE tax (short version) Penalty on early CD withdrawal Alimony paid IRA deduction (no 8606) Student loan interest Tuition and fees deduction


In Scope Standard Deduction Regular Standard Deduction Standard deduction of dependents Increase in standard deduction due

to age and/or blindness Increase in standard deduction due

to real estate taxes and/or new car purchase (Schedule L) new in scope


In Scope Itemized Deductions Medical expense including NY long

term care Taxes (including optional sales

taxes) Mortgage interest, points, PMI Charity cash Charity non-cash up to $500. Form

8283 is out of scope.


Itemized Deductions (continued)

Casualty and Theft out of scope Employee expenses Tax preparation and payment fees Investment expenses Gambling losses


Tax Calculation Tax table in scope Capital gains / qualified dividends

worksheet in scope Alternative Minimum Tax out of

scope Kiddie tax (8814/8615) out of

scope


In Scope Tax Credits Foreign Tax Credit (no 1116 required) Child Care Credit Credit for Elderly Education Credit Retirement Savings Credit Child Tax Credit Residential Energy Credit (Part 1 only) Other Tax Credits out of scope


Other In Scope Taxes SE Tax (short form) Tax on tips (4137) Early distribution penalty (no form 5329) Advance EIC Household employment taxes out of

scope Unwithheld FICA/Medicare commonly

done


In Scope Payments Withheld and estimated tax payments New Making Work Pay Schedule M EIC (new rules) Additional child tax credit New Refundable education credit First time homebuyer credit Excess social security Direct deposit Third party designee NOT YOU


TY 2009 Concerns Powerpoints from the national

meeting in Dallas show new in-scope items that are either explicitly out-of-scope in the text or not covered.

I have treated these as still out-of-scope


Allegedly in-scope Form 8606

Partially deductible IRA contributions Roth conversions

Form 8283 Only Section A Part 1 (Items under

$5,000 and publicly traded securities) Health Savings Accounts


In-scope, but ... Form 5695 (Energy Credits) Part 1

is in scope, but no useful information is in the text.

1099-C (Cancellation of debt) is in scope for forgiveness of principle residence debt, but not for the more common forgiveness of credit card or auto loan debt.


RememberYou are completely authorized as a volunteer preparer

to NOT prepare a return. Some individuals may attempt to defraud the government by filing false tax returns. If you have any question at all about the validity of the information provided by a taxpayer or are uncomfortable with a taxpayer situation, discuss your concern with your site coordinator or other individual in charge of the site. Together, you can make the decision to diplomatically explain the confusion or concern, if possible, or simply refer the taxpayer to a paid tax preparer


And lastly, If you don’t know how to do it ... It’s

out of scope If you have to guess ... It’s out of

scope If it’s not right, but you think you can

get away with it ... It’s out of scope And if it’s out of scope ... Don’t do it.


Class Discussion EIC & Child Care

Sam and Janet Evening both have W2 jobs, earning about $32,000 total. They have a daughter Goode, age 9. They pay Becky (a 17 year old neighbor) $150 per month to come over and babysit Goode after school so they can work. They want to claim both EIC and the Child Care Tax Credit. They need the money fast, so they want to do an e-filed return with direct deposit. Becky refuses to tell them her SSN.

Can they meet their goals?


Class DiscussionChild Care

You can help them, but without a provider SSN the return cannot be e-filed


Class Discussion - EIC

Sam and Janet Evening both have W2 jobs, earning about $32,000 total. They have a daughter Goode, age 9. Goode has investment interest income of $3,500 from her grandmother’s inheritance. Sam and Janet want to minimize the family’s taxes. They need the money fast, so they want to e-file with direct deposit.

Can you help the family meet their goals ?


Class Discussion - EIC

The $3,500 interest income is above the limit of investment income for EIC eligibility.

The $3,500 must be reported of Goode’s own return so that Sam and Janet can claim EIC

So now may you help the family meet their goals ?


No, you may not

Goode Evening’s return requires a “kiddie tax” form (8615) and is out of scope


Class Exercise EIC & Child Care

Sam and Janet Evening both have W2 jobs, earning about $32,000 total. They have a daughter Goode, age 9. They pay Brenda (a 19 year old neighbor) $150 per month to come over and babysit Goode after school so they can work. They want to claim both EIC and the Child Care Tax Credit. They need the money fast, so they want to do an e-filed return with direct deposit. Brenda willingly provides her SSN.

May you help them meet their goals?


Class Exercise Child Care

Sorry, their return is now out of scope. A 19 year old babysitter making over $1,600 a year by working in your house is a household employee and requires that Schedule H be filed.

A 17 year old babysitter is exempt from this requirement.

scope november 20091 aarp/tce program and scope what is the mission of aarp/tce? why are we...

Documents

scope slide

scope federal returns

scope simple capital

scope unemployment new

trained slide

taxpayer slide

schedule d slide

tax year