Scope

Out of Scope

Our primary source document for scope is the
Tax-Aide Scope Manual
(What’s In – What’s Out).


Watch for  OUT OF SCOPE  indicators throughout this web site.


Scope changes for TY2016:

  • 1099-R Code J  (ROTH distribution) could be deemed non-taxable using Form 8606 part 3. Due to TaxSlayer implementation, this is not in scope for TY2016.
  • Form 1099-C: Cancellation of non-business credit card debt that includes interest in Box 3 on Form 1099-C is now in scope.
  • Form 1099-R: A distribution from an Employee Stock Option Plan (ESOP) reported on Form 1099-R with distribution Code U is now in scope.

Other changes for clarification:

  • Schedule C-EZ: Now listed and continues out of scope as no training is provided.
  • Schedule E: Rental of a personal residence for less than 15 days for the year is not considered a rental activity by the IRS and is not reportable income. If a Form 1099-MISC is received, then link the Form 1099-MISC to Schedule E and enter the same amount on Schedule E line 19 as an expense.
  • Form W-7: Application for IRS Individual Taxpayer Identification Number is in scope
  • Form 982: In scope only if taxpayer is applying the qualified principal residence indebtedness exclusion (line 1e on form). Not in scope if taxpayer is in bankruptcy or selects the insolvency exclusion.
  • Form 1099-INT: Removed NAOB reference and added nominee reference; clarified out of scope boxes.
  • Form 1099-OID: Removed box 8 – Original issue discount on U.S. Treasury obligations – as out of scope
  • Form 1099-R: An early distribution from a Roth IRA with no known exception (in most cases, under age 59½) with distribution Code J is in scope if determined that taxpayer has no exceptions. TaxSlayer suggests completion of Part III of Form 8606 which continues to be out of scope, but that can be ignored. Form 5329 is required.
  • Form 2106: Use in place of Form 2106-EZ which is not available in TaxSlayer. Also clarified scope language.
  • Form 6251 (Alternative Minimum Tax): In scope for entry of interest from Private Activity Bonds (PAB) in TaxSlayer. Out of scope if AMT applies to taxpayer.

VITA/TCE vs AARP scope:

In scope for AARP but noted as out of scope in the Pub 4491 or Pub 4012:

  • State tax refund from any prior year when it is clearly fully taxable or fully nontaxable
  • Sale of bonds that mature or are sold with no gain or loss or are reported on a brokerage statement with capital gain or loss only (no ordinary income/loss)
  • Sale of inherited property listed as in scope for Schedule D in the Scope Manual and, if inherited in 2010, taxpayer provides the acquisition date and basis
  • Sale of gifted property listed as in scope for Schedule D in the Scope Manual if the taxpayer provides the acquisition date and basis
  • “Sale” of totally worthless securities
  • Schedule C expense for renting equipment, other than a vehicle, for more than 30 days
  • Schedule E: Rental of a personal residence for less than 15 days for the year is not considered a rental activity by the IRS and is not reportable income. If a Form 1099-MISC is received, then link the Form 1099-MISC to Schedule E and enter the same amount on Schedule E line 19 as an expense.
  • Form 5329 Part IX to waive additional tax for failure to take Required Minimum Distribution
  • Form 1099-R codes 6, J, L, U and W and code T if distribution is not taxable
  • Form 1099-K for self-employment income (not rental income such as Airbnb)
  • Income from the rent of land reported on 1099-MISC or received as cash
  • Canadian or German social security income that is treated as US social security
  • Form 8283 to report non-cash donations of more than $500, but less than $5,000
  • Form 1099-LTC and Form 8853 for Long-Term Care Insurance payments
  • Form 1099-Q if entire distribution is used for qualified education expenses
  • Form 8606 Part I only.
  • Form 2106 for unreimbursed business mileage or entertainment expenses on Schedule A Line 21
  • Form 6251 (Alternative Minimum Tax) for entry of interest from Private Activity Bonds (PAB) in TaxSlayer. Out of scope if AMT applies to taxpayer.
To assist in identifying and preventing identity theft, Tax-Aide recommends taxpayers e-file returns, even if not required.
Since a $0 AGI return cannot be e-filed, enter $1 on Line 21 Other Income (via 1040 Wkt7) and describe as “IN ORDER TO EFILE.”

Out of scope in the Tax-Aide Scope Manual but allowed in Pub 4491 or Pub 4012:

  • Rental income from sources such as a home except for an active duty military taxpayer AND the Counselor and Quality Reviewer both have Military certification. All other rental situations (room in home, apartment over garage, separate building, for profit, not for profit, Airbnb, etc.) are out of scope regardless of certifications.
  • Schedule C-EZ continues out of scope as no training is provided.
  • State/local unique topics set by regional or state leaders as out of scope due to complexity and/or lack of sufficient training.
  • Specific in scope tax law topics on which a counselor is not trained.

The following “extenders” have been re-instated permanently:

  • Form 1040 income/IRA/1099-R:
    • the tax exemption of distributions from individual retirement accounts for charitable purpose
  • Form 1040 adjustments:
    • the tax deduction of expenses of elementary and secondary school teachers
  • Schedule A itemized deductions:
    • the tax deduction of state and local general sales taxes in lieu of state and local income taxes

The following “extenders” have been re-instated through 2016:

  • Form 1040 adjustments:
    • the tax deduction of qualified tuition and related expenses
  • Schedule A itemized deductions:
    • the tax deduction of mortgage insurance premiums
    • the tax deduction of contributions of real property interests for conservation purposes
  • Form 1040 credits:
    • 10% credit for purchase of qualified energy efficiency improvements to existing main homes (Form 5695 Part II)
    • 10% credit for purchase of electric motorcycles and fuel cell vehicles but  OUT OF SCOPE .
  • Cancellation of Debt:
    • the tax exclusion of imputed income from the discharge of indebtedness for a principal residence (in scope with COD certification, but may be  OUT OF SCOPE  for your District or site)

In and Out-of-Scope issues are noted throughout this web site. Some local sites may decide that certain topics are Out-of-Scope for their site (see your specific site page for that information). It is important that we only prepare returns that are 100% in-scope and for which we are trained.

Adherence to Scope video
NTTC Chair, Steve Conary’s comments (9/2015, 9 min)
Going out-of-scope is contrary to the IRS and AARP policies you accepted when you signed the Volunteer Agreement, you lose the protection of the Volunteer Act of 1997, you jeopardize the AARP Foundation grants from the IRS.

  • There is absolutely nothing for any Counselor to gain by working out of scope
  • Don’t make the taxpayer’s problem your problem
  • Even if you have stretched scope boundaries in the past – DON’T.

The following local documents provide useful Out-of-scope summaries: