1. Scope November 20091 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/aarp Don Priebe taxes@w2in.com

2. Scope November 20092 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

3. Scope November 20093 AARP/TCE Mission The programs 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.

4. Scope November 20094 Standard Service Standard 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.

5. Scope November 20095 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.

6. Scope November 20096 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.

7. Scope November 20097 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

8. Scope November 20098 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 operators license or maintain insurance.

9. Scope November 20099 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).

10. Scope November 200910 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.

11. Scope November 200911 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

12. Scope November 200912 Pub 4012 has a two page chart on what is in-scope

13. Scope November 200913 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

14. Scope November 200914 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

15. Scope November 200915 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

16. Scope November 200916 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

17. Scope November 200917 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

18. Scope November 200918 IRA and Pension Normal IRA and pension distributions IRA rollovers Premature distributions with penalty Charitable donation of IRA funds No 8606 No 5329

19. Scope November 200919 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.

20. Scope November 200920 In Scope Other Income Gambling winnings (with or without withholding) Jury duty, election pay Contests, prizes NOT cancellation of debt

21. Scope November 200921 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

22. Scope November 200922 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

23. Scope November 200923 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.

24. Scope November 200924 Itemized Deductions (continued) Casualty and Theft out of scope Employee expenses Tax preparation and payment fees Investment expenses Gambling losses

25. Scope November 200925 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

26. Scope November 200926 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

27. Scope November 200927 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

28. Scope November 200928 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

29. Scope November 200929 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

30. Scope November 200930 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

31. Scope November 200931 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.

32. Scope November 200932 Remember You 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

33. Scope November 200933 And lastly, If you dont know how to do it... Its out of scope If you have to guess... Its out of scope If its not right, but you think you can get away with it... Its out of scope And if its out of scope... Dont do it.

34. Scope November 200934 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?

35. Scope November 200935 Class Discussion Child Care You can help them, but without a provider SSN the return cannot be e-filed

36. Scope November 200936 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 grandmothers inheritance. Sam and Janet want to minimize the familys taxes. They need the money fast, so they want to e- file with direct deposit. Can you help the family meet their goals ?

37. Scope November 200937 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 Goodes own return so that Sam and Janet can claim EIC So now may you help the family meet their goals ?

38. Scope November 200938 No, you may not Goode Evenings return requires a kiddie tax form (8615) and is out of scope

39. Scope November 200939 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?

40. Scope November 200940 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.