IRS Enrolled Agent, RTRP & CPA Exam & CPE Blog

New Emphasis Expected on Applying CPA Course Audit Standards to Internal Controls at Small Companies

Mandated auditing of public companies is supposed to include evaluation of internal controls in most cases. However, the Sarbanes-Oxley Act exempts auditors of smaller enterprises from checking internal control over financial reporting. New research suggests that closer scrutiny of this matter according to audit principles from CPA exam review is needed to reduce fraud at the smallest public companies.

From 1998 through 2010, auditors were sanctioned eighty-seven times by the Securities and Exchange Commission in cases involving fraudulent financial reports. Most of the problems surrounded poor practices at companies with revenue and assets below $40 million. These smaller enterprises are most commonly audited by accounting firms with much less size than the large national operations.

SEC sanctions targeted small audit firms in 57 percent of the fraudulent circumstances. This signals a need for accountants at these organizations to focus on developing sound audits consistent with their CPA preparation roots. Of course, large accounting firms were not immune to SEC criticism. Sanctions were leveled at them in 43 percent of the instances were financial statement fraud was connected to poor audit work.

Amazingly, six of the eighty-seven sanctioned cases were cited for lacking any meaningful audit work. All of these situations entailed small firms that completely neglected CPA course audit guidelines. Among the thirty-five sanctions against national audit firms, nine were aimed at defunct accounting firm Arthur Anderson.

Not every SEC fraud investigation concluded that auditors were deserving of some blame. However, a large number of fraud matters were related to poor audit quality. Clean audit opinions were issued in 58 percent of the SEC determinations of fraudulent financial statements. That alarming statistic points to audits that were unsuitably designed for achieving the objectives described in study for CPA licensing.

Some of the favorable audit opinions did include explanatory paragraphs that addressed auditor concerns such as risk of going out of business and changes in accounting principles. These factors are not considered meaningful enough to identify the existence of fraudulent financial reporting by companies. The SEC sanctions of auditors most commonly cited lack of competent and diligent audit work, failure to exercise adequate skepticism of evaluated data, inadequate identification and assessment of risk, and inadequate response to identified risks.

These are all crucial elements for accountants to understand from CPA study material. They are also points of emphasis by the Public Company Accounting Oversight Board, which has issued ongoing proclamations calling for auditors to conduct better risk assessments and elevate the degree of skepticism. The PCAOB believes that better audit performance will arise from on-the-job training that stresses a questioning mindset. The accounting profession is probably moving in this direction because only eleven of the eighty-seven SEC sanctions of auditors have occurred in the years following enactment of Sarbanes-Oxley.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

Tags: CPA exam review, CPA study material

Adult Children Caring for Aging Parents Present Increasingly Common Enrolled Agent Jobs

As more people in the boomer generation reach their golden years, a rising number of instances exist where aging parents move in with their adult children. This triggers several tax considerations for Enrolled Agents dealing with any of the parties. Multiple generations of adults in the same household is nothing new, but these situations are more likely than ever due to life expectancy increases and diminished retirement savings. Living arrangements of taxpayers shape the solutions to a variety of EA problems.

The top consideration for tax professionals when addressing multi-generational households of adults is identifying who is required to file tax returns. Retired individuals with little income in addition to Social Security benefits are exempt from income tax reporting. Whether adult children can claim their parents as dependents calls for examination of the standards from Enrolled Agent study materials about qualifying relatives. These are different than the rules for children that taxpayers may claim as dependents.

A primary distinction for qualifying relatives is that they cannot have more income than the annual amount allowed for a personal exemption. That figure changes every year by adjustment for inflation. However, payments from Social Security are not included in the determination of income. Consequently, a parent with only a couple thousand dollars of income from sources other than Social Security is eligible for an adult child to claim as a dependent.

A taxpayer must provide more than half of the support for a qualifying relative. This requirement can entail a detailed calculation. However, Enrolled Agent jobs are usually simplified when a taxpayer obviously provides more than half of a parent’s support. For instance, the largest component of living expenses is typically housing. A taxpayer counts the fair rental value of housing provided to a parent as an element of support – even when no rent is actually paid. Combining this with amounts spent for food and similar necessities normally surpasses more than half of a parent’s support. However, this uncomplicated shortcut does not mean that taxpayers should neglect keeping records of living expenses, as Anthony Olivo learned in court.

Olivo was an attorney – with a specialty in tax law – who practiced from 1976 until around 1994, when he was devoting most of his time to caring for his aging parents. He lived with his parents from 1994 through 2003 and earned almost nothing from his law practice. After his parents died, Olivo figured their estates owed him for all those years of lost income. On his mother’s estate tax return, Olivo deducted a $44,200 administrator assessment plus another $1,240,000 for his services to mom over several years.

The court did not allow the estate to deduct the $1.2 million for Olivo’s personal services. Lacking a contract or invoices, no evidence existed that the parents agreed to compensate their son. Despite his seeming round-the-clock care, Olivo failed to maintain time records or establish in any way a value for his services. He merely estimated his hours and changed $150 per hour. Olivo learned the same lesson about good record keeping as family members who pay for outside support of parents.

Another important fact from Enrolled Agent education about qualifying relatives is that residency is not required when claiming a parent as a dependent. Therefore, a taxpayer who provides for more than half the support of an aging parent living in an assisted care facility may claim the dependency exemption.

Of further significance is that stepparents and in-laws are treated just like a person’s legal parents. Plus, once established, such relationships do not end by death or divorce. So, the taxpayer who lets an ex-spouse’s stepfather move in and provides more than half of the old man’s support can claim him as a dependent. That’s probably a rare occurrence in Enrolled Agent tax work, but the possibility demands constant diligent at investigating details.

IRS Circular 230 Disclosure

Tags: enrolled agent education, enrolled agent study materials

Enrolled Agent Tax Clients Who Make Bad Business Decisions Are Not Always Entitled to the Deductions They Expect

No matter what level of financial sophistication a group of individuals possesses, a large number of them lack sound knowledge of tax matters. Experienced tax professionals have become desensitized to the strange ways that people expect personal purchases to comprise tax deductions. Enrolled Agents commonly field inquiries about how much of the cost for a business or amount paid at closing for a home acquisition is tax deductible. Rendering solutions to these EA problems is complex because some outlays for a business or a house do produce tax deductions, but not in the ways or for the reasons taxpayers expect.

For example, many business costs are capitalized. This requires utilization of depreciation rules. Further complicating matters is discovery of the exact cost for buying business property. Sometimes only a portion of the total amount is allocable to a business purpose. A key step often omitted by taxpayers is documenting the business connection for certain expenditures. Experts who pass the Enrolled Agent examination can only apply their knowledge to facts that are properly recorded by their clients.

When Ed and Lydia Heinbockel contested the IRS in Tax Court, they were the recipients of a long decision from the judge. Their plight might have been less arduous if they had instead relied upon an Enrolled Agent. All of the judge’s rulings were consistent with Enrolled Agent study materials. Most of the Heinbockels’ difficulty entailed capitalized costs, which were not well documented. Hence, they encountered trouble as a result of IRS audit for their 2005 through 2007 tax returns.

A great number of alleged business expenses were deducted by the Heinbockels in the years examined. First, Ed recorded the purchase of an airplane as having a business purpose because he rented it to others when he was not flying it. Several factors were against him. One of these is an unfortunately frequent situation encountered during Enrolled Agent tax work for purported business entities. That is, Ed failed to operate in a business-like manner, including a failure to keep adequate records. The court decided that the activity did not embody a genuine intent for profit. No deduction for the airplane was allowed because the purchase was personal rather than business related.

The Heinbockels also planned another business venture. They spent money developing a vineyard on land they owned. However, this project was abandoned when neighbors complained about the concept. In fact, the grapes were never planted and thus no income was ever realized. The Heinbockels’ expenditures fall within the lesson from EA training about startup expenses. These are capitalized costs that are only deductible when the business finally begins operating. Since the activity was never launched, no tax deductions were proper. The only advantage of these capital costs is that they reduce the gain realized by the Heinbockels from selling the land in 2007.

Adding to the issues before the Court, was Mrs. Heinbockel’s personal shopping business known as Lydia’s World. More bad record keeping doomed allowance for most of the expenses related to this venture. Topping the list was a disallowed deduction for business use of a personal vehicle without maintaining a written mileage log. None of the claimed business expenses for travel and meals were allowed. The Court denied any tax deductions for 2005 due to lack of substantiation. The only concession was a deduction for cost of goods sold equal to 50 percent of revenue, which was permitted under the Cohan rule. A few other expense deductions were allowed for 2006 and 2007.

The court case also settled an issue related to the claim of a bad debt loss for money loaned to Lydia’s brother. Based upon the amount of back taxes assessed on the Heinbockels, the brother might need to at least temporarily rely on a new source of funds.

IRS Circular 230 Disclosure

Tags: Enrolled Agent Examination, enrolled agent study materials

Enrolled Agent Career Sill Appears Sound as Taxpayers Shun Online Substitutes

Evidence suggests that the proportional share of taxpayers who file their own returns with the IRS may have peaked. Even the allure of access to tax professionals for do-it-yourselfers using Intuit’s TurboTax product failed to meet expectations. Apparently, individuals prefer face-to-face personal relationships when they must rely upon experts that meet Enrolled Agent requirements. The EAs at Intuit were reportedly not a big attraction to TurboTax customers.

For the past two tax seasons, Intuit has highly publicized the availability tax pros – including EAs and CPAs – to advise users of TurboTax. Intuit CEO Brad Smith reported in the company’s recent earnings webcast that unsatisfying financial results would trigger substantial changes to the program next year. This announcement indicates that an Enrolled Agent career representing local individuals remains secure compared to online tax return preparation using remote experts.

Intuit’s goal was attracting more customers by making professional advice available. However, utilization of the service was limited. TurboTax television advertising suggested that seasonal and part-time tax offices were not competent professional tax businesses. This insinuation generated an unsuccessful legal action by H&R Block for removal of the ads. Growth slowed for both TurboTax and H&R Block in the recently ended tax season.

The 4 percent rise in the number of TurboTax users doesn’t represent much of a shift away from tax preparer services to self-preparation software. However, essentially flat year-over-year customer totals at H&R Block doesn’t reveal market attraction to tax stores either. People seem to prefer paying for customized advice of professionals who have passed the Enrolled Agents exam. Stores with unlicensed preparers and software vendors with distant access to licensed experts were not acceptable substitutes. Perhaps taxpayers perceive greater value from fully relying upon an EA with whom they can connect personally.

Alternatively, if a person wants to tackle tax preparation alone, they turn to a software source with the lowest cost. For example, growth this year in users of online resource TaxAct was 8 percent. That software is cheap, but comes without any support by tax professionals. In response, Intuit is reportedly considering limits on the amount of free tax advice and charging for greater access to EAs or CPAs.

An additional fact from Intuit substantiates that jobs for Enrolled Agents with independent practices are growing. That is, sales at Intuit’s professional software business have increased over the past two tax seasons. After showing little growth a few years ago, users of professional software packages from Intuit reach 121,000 in 2013. Of course, this still dwarfs the 26.5 million tax returns filed via TurboTax. Nevertheless, professional preparers with reliable software can complete millions of tax returns. Smith stated in the webcast that the number of tax return extensions filed in 2013 by professional preparers using Intuit platforms represented a 20 percent increase over the prior year.

Sales of Intuit’s professional tax software products may have benefited from well-publicized problems in 2013 with the offerings of competitors. However, the important factor for Enrolled Agent tax preparers is that fewer consumers appear persuaded to switch over to do-it-yourself software. Individuals who are suitable for the self-prepared option are already using it. Those requiring professional tax assistance are not attracted to obtaining it merely as backup from a software vendor.

As the acceleration slows for self-prepared tax returns, work for tax preparers should rise in lockstep with software vendors overall. Plus, the role of tax professionals is gaining acceptance over stores such as H&R Block. Gimmicks by Intuit to combine professional tax advice with software have been unsuccessful in gaining market appeal.

IRS Circular 230 Disclosure

Tags: enrolled agent tax, enrolled agents exam

Top Scoring Accountants Offer Insight About Successful Study for CPA Exam

During a career in accounting, you soon discover that the only way to learn is by asking questions. The same principle applies to study for CPA exam success. Making inquires of experts is the optimal path to obtaining insights about a variety of features concerning the CPA exam.

The first area where a young accountant conducts an investigation into the thought of others concerns recommendations about an online CPA review course. Starting with the best instruction yields a higher probability of passing test scores. A course with ideal design facilitates better retention of details.

Preparing for the four sections of the CPA exam is mostly a solitary effort. The process is self-paced. You don’t simply probe the mind of an expert with a series of discussions. Instead, the CPA review material is presented for tackling as you see fit. Your discretion applies when designing a schedule and deploying study techniques.

Still, asking others for advise about triumph over the CPA exam is a good starting point. The Oregon Society of CPAs conducted exactly that investigation of two state residents who received the Elijah Watt Sells Award from the American Institute of Certified Public Accountants. That prize is bestowed upon individuals who obtained cumulative average scores above 95.5 on all four sections of the Uniform CPA Exam. In addition, the award winners must have passed each exam section on the first attempt.

One of the 2012 award recipients is a University of Oregon graduate who is currently employed in Portland. She emphasized the objective of maintaining a rigid pace with a CPA study plan. Her remarks suggest that the appearance of time-consuming distractions is inevitable, but resisting them is imperative. Furthermore, she pointed out the importance of understanding the rationale behind accounting standards. Therefore, when memorization fails during testing, recall is possible by applying the principles that underlie a subject.

Oregon’s 2011 award recipient, who currently works in Portland, also stressed the significance of sound study planning. He commented on the discipline and mental endurance required for CPA exam preparation. His study technique deployed continuous drilling with practice multiple-choice questions. To accomplish this, he relied upon an online study course that tracked his answers and progress as his sample testing improved. He also mentioned how constant drills with multiple-choice questions cemented accounting concepts in his mind rather than delivering mere memorization of facts.

There you have it regarding the main system for mastering the CPA exam. The key factors are crafting a disciplined plan of attack plus using a study course that illuminates the foundational principles lying beneath answers to a plethora of multiple-choice questions.

IRS Circular 230 Disclosure

Tags: CPA exam preparation, CPA study

Solutions to EA Problems Involving Childcare Expense Tax Credit Require Special Considerations About Summer Care

With the busy period of tax season now ended, Enrolled Agents shift their attention toward several new directions. Some work surrounds finishing tax returns with extended due dates. Additional time of EAs is devoted to simply reminding their clients about a year-round presence for rendering any tax assistance. Instead of closing shop until next tax season, plenty of Enrolled Agent jobs entail communication that maintains a market presence.

A common marketing device for Enrolled Agents is presenting general tax information via a newsletter or email campaign. This instructs clients about retaining records of certain events throughout the year, which results in capturing tax deductions or credits at the next tax season. In addition to enlightening taxpayers, many of them develop questions related to their specific circumstances. That creates contact opportunities for delivering solutions to EA problems that embody distinctive facts.

For example, as children are out of school for the summer, childcare costs rise for working parents. Recapping the availability of the Child and Dependent Care Credit is therefore a timely benefit given by EAs to their clientele with children. A basic statement about the credit applying to children under age 13 can precipitate some follow-up inquiries by parents whose children turn 13 during the current tax year.

Fortunately, thorough Enrolled Agent preparation arms an EA with the knowledge for addressing particular conditions. The Child and Dependent Care Credit is calculated using costs incurred for any child who is under age 13 when the care is provided. Hence, childcare expenses up to the child’s thirteenth birthday are allowed.

Many of the questions about the tax credit for childcare expenses focus on situations of divorced parents. Only a custodial parent may claim the Child and Dependent Care Credit. So, responding to inquiries from divorced parents who are paying childcare expenses demands investigating further details. Knowing the rules from Enrolled Agent training for determining a custodial parent is crucial. However, although the custodial parent is typically permitted to claim the dependency exemption for the child, this is not a prerequisite for claiming the Child and Dependent Care Credit.

The next step taken by EAs regarding this credit is describing for taxpayers the record-keeping requirement. Claiming the credit on Form 2441 necessitates having the childcare provider’s name, address, and tax identification number. Taxpayers are often disappointed to learn that an Enrolled Agent will not bother with Form 2441 when a tax ID number is unknown – unless the childcare provider is a non-profit organization.

Fortunately, parents who use multiple childcare providers may escape record retention on every provider. Only the first $3,000 of expenses for one child qualifies for the tax credit. The limit is $6,000 for more than one child. In addition, the qualifying expenses cannot exceed the income of the lowest earning spouse. If one spouse is disabled or a full-time student, another element from an Enrolled Agent course applies to this issue. The non-working spouse in one of these positions is deemed to earn $250 per month – or $500 per month when more than one child is eligible for the tax credit determination.

Finally, an EA can safely tell taxpayers not to extend any effort in retaining information on the cost of summer camps where children stay overnight. These childcare costs don’t qualify for any tax credit. However, plenty of day camp summer activities do indeed give a tax advantage that few taxpayers realize unless they receive EA advice.

IRS Circular 230 Disclosure

Tags: enrolled agent course, enrolled agent preparation

Possible Major Change for Enrolled Agent Study Materials is Elimination of Joint Filing to Overcome Tax Reform Stall About Same-Sex Couples

Implementation of federal income tax reform appears stalled by the basic concept of filing status. The five filing status options have a vital impact on various tax calculations. Tax practitioners quickly discover in Enrolled Agent training courses how different limitations are imposed on taxpayers based upon filing status. Significantly, the primary determinant of tax filing status is marriage.

Consequently, tax reform proposals cannot ignore marital status issues. Inevitably, same-sex marriage enters the debate as several states allow these legal unions. This is one area where the IRS rules do not align with local law. The result is complicated Enrolled Agent jobs for same-sex couples in locations where these marriages are sanctioned. Joint state income tax returns are permitted, but federal returns are separate.

The Republican majority in the House of Representatives seems to oppose same-sex marriage more than favoring tax reform. Even if the Supreme Court rules that the Defense of Marriage Act is unconstitutional, most House Republicans voted to prohibit funding appropriations that disregard intent of the Act. This stance presents a formidable barrier to goals in the Senate for implementing new tax measures. Proposed simplifications of individual income tax rules emanating from the Senate Finance Committee have emphasized the ambition of marriage parity. An Enrolled Agent course for tax professionals reveals that the combination of progressive tax rates and joint filing by married couples necessarily causes either a tax penalty or tax benefit.

The only reform options are elimination of marriage penalties or elimination of marriage bonuses. Achieving both objectives is impossible. Either avenue would generate a substantial alternation to Enrolled Agent study materials. Removing any marriage penalty is accomplished by resetting the tax brackets and filing thresholds for married couples to exactly twice the level of single taxpayers. But, this triggers more situations where couples incur a tax benefit by marrying. Hence, federal recognition of same-sex marriage becomes increasing important. Alternatively, setting brackets and thresholds at the same level for all tax returns causes removal of marriage bonuses. This will have the obvious result of penalizing more couples with combined incomes after marriage.

Repeal of joint filing status eliminates marriage bonus situations altogether. But a variation on this would remove marriage penalties while retaining marriage bonuses. That proposal simply changes joint filing into an elective choice. Unfortunately, processing a tax return for nearly every person will surely stretch IRS resources. It certainly creates more Enrolled Agent tax work, because couples would require two calculations for determination of the optimal filing method. Moreover, making joint filing optional creates an environment of dispute mediation with the IRS over allocation of income, deductions, and tax credits between married individuals.

Retaining joint filing status leaves the burden of amending the Internal Revenue Code to provide marriage parity for same-sex couples. Only by elimination of joint filing can marital status exit the tax reform discussion. However, that step contradicts any aspiration of retaining marriage bonuses while reducing marriage penalties.

IRS Circular 230 Disclosure

Tags: enrolled agent course, enrolled agent study materials

Another Example Proves Why Enrolled Agent Career Entails Asking Inquisitive Questions To Protect Taxpayers

The easiest way an Enrolled Agent can summarize for a taxpayer what expenses are tax-deductible is to point out that they usually bear some relation to receiving income. Most tax deductions described in an Enrolled Agent course arise from business operations, rental activities, and investing.

Of course, exceptions exist for such limited categories of itemized deductions and adjustments as medical expenses, casualty losses, charitable donations, moving costs, retirement plan contributions, home mortgage interest, and local tax assessments. These areas have well-known limits on deductibility. Less understood are the limitations on deduction of expenses against the income this spending generates.

An especially important condition arises when deducted expenses exceed the associated income. For obvious reasons, the IRS is suspicious of activities that generate losses. Sometimes, a limit is placed on the amount of annual loss deductible against other income sources. Common examples from Enrolled Agent study materials are losses on rental properties and net capital losses.

The most egregious cases placing a limit on deductions are those where loss creation appears as a perpetual feature of the pursuit. These situations are described in EA training as hobbies rather than businesses. A taxpayer is only allowed to deduct expenses associated with a hobby to the extent that the activity produces income. In an extreme example that appeared in Tax Court, Sal Westrich attempted to deduct expenses related to his profession despite not generating any income.

Westrich was a history professor who converted to working on a part-time basis in 2000. He used his new free time to pursue historical research and considered his special interest in French as a professional matter. Westrich wrote several plays but never realized any income from the activity. However, he did incur substantial expense traveling in France. After a few years, Westrich switched to writing historical studies. Again, he did not receive any income from these writings.

From 2000 through 2008, Westrich filed tax returns with Schedule C stating his principal business as research writer. While never reporting any revenue, he deducted expenses for renting a house in France as well as hiring a driver, maid, and typist. These deductions totaled around $50,000 and $40,000 in 2007 and 2008, respectively.

The Tax Court pointed out that Westrich did not consult with any accountants or financial advisers. Even if he had consulted with, say, a tax expert possessing an EA license, no advice could have magically converted his personal living expenses into legitimate tax deductions. Furthermore, some other crucial facts caused the court to rule that Westrich was not engaged in a genuine business endeavor. He lacked financial records and did not have a business plan. Plus, he failed to separate funds for his purported business from his personal money.

Particularly damaging for Westrich was a circumstance that’s unfortunately encountered too frequently during an Enrolled Agent career. He presented no indication of having implemented any reasonable plan to reduce expenses and generate profits. This is the key factor triggering Enrolled Agents to explain for taxpayers that they must have profit potential to claim an activity as a business.

IRS Circular 230 Disclosure

Tags: enrolled agent course, enrolled agent study materials

Pending Revisions to GAAP Foretell Major Changes to CPA Review Material

People outside the accounting industry have difficulty realizing that accountants actually engage in debate over the correct procedures for recording financial transactions. No accounting steps are possible until standards are agreed upon. The aim of courses for CPA study is conveying consistent methods for reporting actions with the same general characteristics. Extensive difficulty arises when realizing that some events are similar, but embody slight variations.

After several hundred years of unfolding discoveries in accounting, people might think that rules have been firmly established for any transaction. But, new ideas always arise that contest old concepts. In fact, substantial revisions are forthcoming in some basic elements of CPA review material. The Financial Accounting Standards Board plans to release changes to several matters over the next few months.

Intended alterations to Generally Accepted Accounting Principles impact revenue recognition, leases, and financial instruments. Consequently, they affect companies of all sizes. Implementing the new measures will command significant effort by existing accountants. Meanwhile, initial entrants to the profession who are starting CPA exam prep will have the benefit of learning the revised standards as their careers begin.

The first of the new GAAP releases is anticipated in the summer of 2013. After years of consideration, revenue recognition is expected to lose any guidance that is targeted at distinctive industries. This departure from the current standard is intended to simplify the timing for recognizing revenue. However, the lack of industry-specific features should also have the effect of complicating questions on this subject in online CPA review courses.

In recent years, one of the main areas of accounting that has received enormous attention is leasing. This matter has comprised a major barrier to convergence of GAAP used in the US and International Financial Reporting Standards used in other countries. Most lease payments in the US are considered expense items. However, a different factor from study for CPA licensing applies when leasing is used as a financing mechanism. These capitalized leases are reported as liabilities on the balance sheet. Proposed new accounting standards intend to categorize all long-term lease obligations as liabilities.

Accounting issues related to financial instruments have also embodied a battleground of ideas. This topic includes the crucial component of determining accurate reserves for credit losses. Another concern is classification of various financial instruments and measurement of value. The final ingredient is handling of hedging activities, which were arranged into a draft proposal in 2010. Further deliberation will resume later in 2013.

Accountants will find that the new standards are based more on general principles rather than narrowly defined rules. Consequently, CPAs will be called upon to exercise increased professional judgment. In addition to absorbing accounting standard revisions, CPAs are confronted with the added task of tackling interpretation methods.

IRS Circular 230 Disclosure

Tags: CPA exam prep, CPA review material

Details From Enrolled Agent Course About Variations in Tax Filing Deadlines Are Applicable to Many Taxpayers

When the IRS announces extended deadlines for certain groups of individuals to file tax returns, it raises consideration about the normal tax filing date. For example, all individual taxpayers who live in Suffolk County, Massachusetts – which includes the city of Boston – were given a three-month extension for filing their 2012 tax returns. For most people, this means their tax returns are due July 15 instead of April 15.

However, Enrolled Agent tax preparers are aware that not all individuals are confronted by an annual deadline of April 15. This can have an impact on the people affected by the Boston area extension, which applies to the families of victims in the Marathon Day explosions that live outside of Suffolk County. The tax extension of three months could give some individuals until September 15 because they are part of a group that already enjoys an automatic two-month extension.

Every year, certain people are given a deadline for filing their tax returns that’s two months after the deadline for everyone else. They do not need to request the extension. This rule is an entirely distinctive element of Enrolled Agent training than learning to use Form 4868 for securing a six-month extension. The automatic two-month extension is available to US citizens and resident aliens who are living outside the United States or Puerto Rico plus have main places of business outside of those locations. This advantage also includes military personnel on active duty outside the US and Puerto Rico.

Several important details about the automatic two-month extension appear in an Enrolled Agent course. Among the significant facts is that the alternative deadline applies to both filing returns and paying any tax liability. This is a major departure from typical extensions using Form 4868, which only cause a different due date for filing a return. In addition, the two-month extension is applicable for joint tax returns when either spouse meets the eligibility requirements.

A completely separate set of rules applies to military personnel stationed in combat zones. Every EA develops a proficiency in understanding how the combat zone measures are applied because various examples appear frequently in Enrolled Agent exam questions. The general guideline is that service in a combat zone at the time for a required filing or payment of income tax will extend the due date until 180 days after the final day in the combat zone. Deadlines are also extended for hospitalization outside the US as a result of injuries sustained in a combat zone. Hospitalization inside the US for the same reason extends the deadline, but never longer than five years.

Enrolled Agents also are alert to cases of extension for service members stationed outside combat zones who supply direct support for military operations in combat zones and receive special pay for such duties. The tax extension also applies to civilian specialists who train or otherwise serve as support for military personnel in combat zones. Deadline extensions relating to combat zone service apply to spouses, regardless of whether joint or separate returns are filed. However, a separately filing spouse is confronted with some exceptions in the event of the service member’s hospitalization for combat zone injuries.

Many taxpayers have circumstances than permit automatic extensions for IRS filing and payments. Assuring these people about their differential deadlines are vital Enrolled Agent jobs. An EA may encounter these conditions when they arise temporarily or when taxpayers fall within protected categories defined in the tax laws.

IRS Circular 230 Disclosure

Tags: enrolled agent course, enrolled agent exam questions

New Emphasis Expected on Applying CPA Course Audit Standards to Internal Controls at Small Companies

Adult Children Caring for Aging Parents Present Increasingly Common Enrolled Agent Jobs

Enrolled Agent Tax Clients Who Make Bad Business Decisions Are Not Always Entitled to the Deductions They Expect

Enrolled Agent Career Sill Appears Sound as Taxpayers Shun Online Substitutes

Top Scoring Accountants Offer Insight About Successful Study for CPA Exam

Solutions to EA Problems Involving Childcare Expense Tax Credit Require Special Considerations About Summer Care

Possible Major Change for Enrolled Agent Study Materials is Elimination of Joint Filing to Overcome Tax Reform Stall About Same-Sex Couples

Another Example Proves Why Enrolled Agent Career Entails Asking Inquisitive Questions To Protect Taxpayers

Pending Revisions to GAAP Foretell Major Changes to CPA Review Material

Details From Enrolled Agent Course About Variations in Tax Filing Deadlines Are Applicable to Many Taxpayers

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