In-Out of Scope Reminders �TY 2025

NTTC Tax Aide Scope Manual� (AARP Portal Library)

RC Training – TY2024

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Scope Manual Reminders

• Form W-2 in scope for church employees with wages greater than $108.28
• and boxes 3 and 5 blank (No social security or Medicare withheld)
• Schedule SE must be completed

RC Training – TY2024

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Virtual Currencies

• VITA changed scope to allow for holding (owning) virtual currencies
• Tax-Aide scope now is in line with VITA
• However, OOS if any virtual currency transactions
• Form 1099-DA (Digital Assets) OOS

RC Training – TY2024

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Virtual Currencies-Scope Manual

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• ➢ Digital assets (virtual currencies, NFTs, etc.) yes/no checkbox
• In scope only if taxpayers can check the No box. None of the following require checking Yes:

• Held no digital assets for the tax year or if the only transactions involving digital assets during the tax year were purchases of digital assets with real currency

• Held digital assets in a wallet or account, or transferred digital assets from one wallet or account they own or control to another that they own or control

• Received digital assets as an inheritance or gift

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RC Training – TY2024

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In Scope-Capital Expenses

• Schedule C capital expenses, if,
• Taxpayer makes the de minimis safe harbor election under section 1.263(a)-1(F), then
• Elects to expense tangible property of $2,500 or less per invoice and per item on the invoice

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RC Training – TY2024

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In Scope-Schedule C Inventory

• Cost of Goods Sold (COGS) - purchases
• Inventory - beginning and ending inventory are $1
• Must be able to expense all purchases
• In other words, all inventory was sold during the year
• Caution: Schedule C expenses including COGS limited to $50,000
• Out of scope if taxpayer had inventory at start of year
• Report as an “other expense”
• NOT as “Materials and Supplies” under Cost of Goods Sold

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RC Training – TY2024

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Out of Scope-Kiddie Tax

Kiddie Tax Remains OOS

RC Training – TY2024

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• Children under 18 and F/T students under 24
• Required to file
• Unearned income (Interest, dividends, capital gains, etc.) > $2,700
• Taxed at parent’s tax rate
• Report on Form 8615
• Taxable Scholarships are treated as earned income for filing requirement and standard deduction; otherwise, unearned income.

In Scope: Self-Employed Health Insurance (SEHI) Adjustment Deduction

• All open years
• Insurance premiums paid for self-employed person/family
• Taxslayer includes a box in Schedule C “General Expenses” that will carry to Schedule 1 line 29
• Include Medicare Insurance, Long Term Care (age limit), dental, and health insurance
• Include CSA Form 1099-R box 5, Insurance (health insurance)
• Out-of-scope if TP eligible or paid by anyone’s employer (i.e. spouse’s employer)

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RC Training – TY2024

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In Scope: Self-Employed Health Insurance (SEHI) Adjustment Deduction

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RC Training – TY2024

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Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction. Amounts paid for health insurance coverage from retirement plan distributions that were nontaxable because you are a retired public safety officer can’t be used to figure the deduction.

Out of Scope: NOLs or Expenses in Excess of $50,000

• Schedule C with a Net Operating Loss (NOL) or expenses in excess of $50,000
• Watch Uber, Lyft, Doordash, other delivery drivers deducting mileage that creates a NOL or exceeds the $50,000 expense limit (example, $50,000/70 cents a mile=71,429 miles)
• Refer taxpayer to a paid preparer

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RC Training – TY2024

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Out of Scope: Miscellaneous

• MFS returns (see local coordinator)
• Professional Gamblers
• Day Traders (stocks, bonds, etc.)
• Hobby income when “not for profit”
• Office in home (watch for-hire drivers)
• Any property subject to depreciation

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RC Training – TY2024

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Out of Scope: Miscellaneous

• Itemized Deductions:
• Investment interest
• Charitable contribution carryover
• Casualty or theft losses
• Donation of property previously depreciated
• Donation of capital gain property (appreciable property such as securities or art work)

RC Training – TY2024

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In Scope: Sale of Inherited or Gifted Property

• Sale of any home received through inheritance or as a gift is out of scope unless used as a personal residence by the taxpayer or spouse after receiving the home (used and owned for 2 out of last 5 years).
• The Taxpayer must provide the cost basis

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RC Training – TY2024

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Form 1099-K Payment Card and Third Party Network Transactions

• In Scope:
• Taxable self-employment income (such as gig-economy driving); See Schedule C limitations
• Taxable rental income; See Schedule E limitations
• Non-taxable income; Taxpayer must provide taxable vs nontaxable breakdown
• TY 23-still $20,000 and 200 transactions
• TY 24-$5,000 threshold requirement
• TY 25- reverted back to $20,000 and 200 transactions
• Out of Scope:
• Forms 1099-K received for any other type of taxable income

RC Training – TY2024

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Form 8958 Allocation of Tax Amounts Between Certain Individuals in Community Property States (Pub 555)

• In Scope:
• New: Only if training provided and not prohibited by State Coordinator
• All conditions must be met in order to file MFS
• You and your spouse lived apart all year.
• You and your spouse didn't file a joint return for a tax year beginning or ending in the calendar year.
• You and/or your spouse had earned income for the calendar year that is community income.
• You and your spouse haven't transferred, directly or indirectly, any of the earned income in condition (3) above between yourselves before the end of the year. Don't take into account transfers satisfying child support obligations or transfers of very small amounts or value.
• File as MFS (not single) and report only income from the taxpayer
• Must enter SSN of other spouse on return to efile (paper if no SSN)
• Out of Scope:
• Live together for even one day during the current tax year.

RC Training – TY2024

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Form 1099-NEC

• F 1099-NEC In scope
• ➢ Nonemployee Compensation
• Not in scope for:
• • Athletes receiving NIL (Name, Image, Likeness) income

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RC Training – TY2024

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High Income Taxpayers OOS

RC Training – TY2024

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Questions

2019 TX3 Instructor Workshop

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