The IRS Special Enrollment Examination (SEE) To Become An Enrolled Agent (EA)

The EA Exam, officially known as the Special Enrollment Examination (SEE), is a three-part exam administered by Prometric on behalf of the Internal Revenue Service. Each part is taken as a separate 100 question EA exam and you will have 3.5 hours to answer all questions for that part. A new EA examination period commences each year on May 1 and continues through February 28 of the following year. No testing occurs during March or April. The period that begins on May 1, 2012 will include questions based on the 2011 tax year. A passing score on each part of the SEE exam is required before the IRS will admit an enrolled agent to practice. Scaled scores are determined by ranking your EA test results against others taking the examination, on a scale ranging between 40 and 130. A score of 105 is the minimum required to pass the SEE. Test results are available immediately following the EA test. Those who pass are informed, but they do not receive a score. Those who fail receive a score along with a diagnostic report indicating the areas of weakness. A candidate may re-take each part up to four times each testing period. There is a two year window from the time you pass the first part, to pass the other two parts of the SEE exam.

How to Register for the IRS Special Enrollment Exam

All candidates who wish to schedule an EA examination need a Preparer Tax Identification Number (PTIN) - To obtain a PTIN, you will need to register online at www.irs.gov/taxpros.

EA Examinations are administered by computer at Prometric testing centers. Currently, the Special Enrollment Examination is given at nearly 300 Prometric testing centers located across the United States and internationally. Test centers are located in most major metropolitan areas. Once you have your PTIN, you may register online at www.prometric.com/irs for your Special Enrollment Exam.

Part 1 - Individuals	Percent of Exam
Section 1: Preliminary Work and Tax Payer Data	15%
Section 2: Income and Assets	25%
Section 3: Deductions and Credits	25%
Section 4: Taxation and Advice	20%
Section 5: Specialized Returns for Individuals	15%
TOTAL	100%

 

Part 2 - Businesses	Percent of Exam
Section 1: Businesses	45%
Section 2: Business Financial Information	40%
Section 3: Specialized Returns and Tax Payers	15%
TOTAL	100%

 

Part 3 - Representation, Practices and Procedures	Percent of Exam
Section 1: Practices and Procedures	33%
Section 2: Representation before the IRS	25%
Section 3: Specific Types of Representation	25%
Section 4: Completion of the Filing Process	17%
TOTAL	100%

Question Types

The questions are multiple choice. Each provides four options from which you choose your answer. Three different multiple-choice formats are used.

Format 1 - Direct question - Which of the following entities are required to file Form 709, United States Gift Tax Return?

A. An individual
B. An estate or trust
C. A corporation
D. All of the above

Format 2 - Incomplete sentence - Supplemental wages are compensation paid in addition to an employee's regular wages. They do not include payments for:

A. Accumulated sick leave
B. Nondeductible moving expenses
C. Vacation pay
D. Travel reimbursements paid at the Federal Government per diem rate

Format 3 - All of the following except - There are five tests which must be met for you to claim an exemption for a dependent. Which of the following is not a requirement?

A. Citizen or Resident Test
B. Member of Household or Relationship Test
C. Disability Test
D. Joint Return Test

Examination Topics

Part 1 - Individuals (100 Items)

Section 1: Preliminary Work and Tax Payer Data (15 items)

Preliminary work to prepare tax returns

Use of prior years' returns for comparison (e.g., reviewing prior Individual form 1040 returns)
Accuracy of prior year's return (e.g., Review of prior year's return for compliance, accuracy and completeness)
Taxpayer biographical information (e.g., date of birth, age, marital status, dependents) Immigration status and/or citizenship (e.g., citizen, visas, green cards, resident alien or non-resident alien)
Taxpayer filing status (e.g., single, MFJ, MFS, widow, HOH)
Sources of all income (e.g., interest, wages, business, sales of property, dividends, interest, rental income)
Sources of applicable adjustments to gross income (e.g., retirement plans, HSAs, alimony, health insurance, moving expenses, self employment tax)
Sources of applicable deductions (e.g., itemized, standard)
Sources of applicable credits (e.g., education, file tax, retirement, energy, child care) Tax payments (e.g. withholding, estimated payments, earned income tax credit) Determine if individual and/or business entity involved (e.g., methods of determination) Items that will affect future returns (e.g., carryover, operating losses, NOL, schedule D, 8801)
All required taxes filed (e.g., employment, gift, estimated)
Special filing requirements (e.g., gifts, foreign income, presidentially declared disaster areas)

Tax returns for individuals, taxpayer data

Filing requirements for tax returns and extensions (e.g., dates) Personal exemptions including dependents
Taxation of unearned income of certain minor children (Kiddie tax) Special requirements for Form 1040-NR
Section 2: Income and Assets (25%)

Section 2: Income and Assets (25 items)

Income

Taxability of wages, salaries and other earnings (e.g., earned income) Interest Income (e.g., taxable and non-taxable)
Dividends and other distributions from mutual funds, corporations, and other entities (e.g., qualified dividends)
Rental income and expenses (e.g., vacation homes, NFP rentals, calculation of deprecation)
Gambling income and allowable deductions (e.g., W-2G, documentation) Tax treatment of forgiveness of debt (e.g, 1099C)
Tax treatment of a U.S. citizen/resident with foreign earned income (e.g, individual tax treaties, form 2555)
Other income (e.g., scholarships, fellowships, Social Security benefits, barter income, independent contractor income, hobby income, alimony, non-taxable combat pay, earned income vs non-earned income)
Constructive receipt of income (e.g., cash vs accrual)

Retirement income

Basis in a traditional IRA (Form 8606)
Comparison of traditional IRA and Roth IRA
Distributions from qualified plans (e.g., pre-tax, after-tax)
Excess contributions and tax treatment (e.g., penalties, 1099R)
Prohibited transactions and tax effects relating to IRAs
IRA conversions and recharacterizations (Form 8606) Excess accumulations and required minimum distributions Loans from IRC section 401(k) plans and other qualified plans

Property, real and personal

Capital gains and losses (e.g., netting effect, short-term, long-term)
Basis of assets (e.g., purchased, gifted or inherited)
Basis of stock after stock splits and/or stock dividends (e.g., research, schedules, brokerage records, options)
Sale of property (e.g., documentation)
Sale of a personal residence (e.g., Sec 121 exclusions)
Installment sales (e.g., related parties, original cost, date of acquisition, possible recalculations and recharacterization)

Adjustments to income

Adjustments to income (e.g., retirement contributions, student loan interest, alimony)
Self-employment tax

Section 3: Deductions and Credits (25 items)

Retirement deductions - (relating to IRAs)

Contribution limits and deductibility of contributions
Earned compensation
Modified adjusted gross income

Itemized deductions

Medical and dental expenses (e.g., subject to AGI limitation)
Deductibility of various types of taxes (e.g., sales, real estate, state and local)
Interest expense (e.g., mortgage interest, investment interest, tracing rules, points)
Charitable contributions (e.g., cash, non-cash, 50% vs 30%, documentation required)
Nonbusiness casualty and theft losses (e.g., form 4864)
Non-business bad debts (e.g, documentation required)
Miscellaneous itemized deductions (e.g., subject or not subject to 2%)
Employee travel, transportation and entertainment expenses (e.g., business purpose) Employee education expenses
AGI limitations on itemized deductions
Allowed itemized deductions for Form 1040-NR

Credits

Child and dependent care credit
Child tax credit
Education credits
Foreign tax credit
Earned income tax credit (EITC)

Section 4: Taxation and Advice (20 items)

Taxation

Alternative minimum tax
Credit for prior year minimum tax
Premature distribution(s) from retirement plans
Household employees (e.g., Schedule H) Estimated tax
Injured spouse (e.g., applicable rules)
Conditions for filing a claim for refund (e.g., amended returns, Form 911, documentation)

Minimization of taxes paid

Adjustments, deductions, and credits
Retirement plans
Earned income credit (e.g., eligibility, preparer documentation)
Education credits and tuition deduction
Adoption credits (e.g., carryovers, limitations, disabled child)
Use of capital gain rates versus ordinary income rates (e.g, character of transaction)

Advising the individual taxpayer

Reporting obligations for individuals (e.g. sale of home)
Property sales (e.g., real and personal such as homes, stocks, and businesses, internet sales)
Education planning (e.g., Hope credit, lifetime learning credit, IRC section 529 plans)
Estate planning (e.g., gift versus inheritance, trusts, family partnerships, charitable giving, LTC)
Retirement planning (e.g., annuities, IRAs, employer plans, early retirement rules, required minimum distribution, beneficiary ownership)
Marriage and divorce (e.g., pre- and post-nuptial agreements, divorce settlement, common-law or community property)

Section 5: Specialized Returns for Individuals (15 items)

Estate tax

Gross estate
Taxable estate: calculations and payments
Unified credit
Jointly-held property
Life insurance and taxable estate
Marital deduction and other marital issues
IRAs and retirement plans
Filing requirements

Gift tax

Gift-splitting
Annual exclusion
Unified credit
Effect on estate tax (e.g., Generation skipping tax)
Filing requirements

Part 2 - Businesses (100 Items)

Section 1: Businesses (45 items)

Business entities

Types of business entities and their filing requirements: Sole proprietorships, Partnerships, Corporations, S corporations, Farmers, LLCs, Tax-exempt companies and associations
Elections for type of entity
Employer identification number
Accounting periods (tax year)
Accounting methods

Partnerships

Partnership income, expenses, distributions, and flow-through (e.g, self employment income)
Family partnerships
Partner's dealings with partnership (e.g., exchange of property, guaranteed payment, contribution of property to partnership)
Basis of partner's interest
Disposition of partner's interest

Corporations in general

Filing requirements and due dates
Earnings and profits
Shareholder dividends (definition and reporting requirements)
Special deductions (e.g., dividends received deductions, charitable deduction)
Reconciling books to return (e.g., Schedule M series)
Distributions and recognition requirements
Liquidations and stock redemptions

Forming a corporation

Services rendered to a corporation in return for stock
IRC section 351 exchange
Transfer of money or property; receipt of money or property in addition to the stock of that corporation
Mortgaged property transferred
Exchange of property other than a IRC section 351 exchange
Controlled groups
Closely held corporations
Personal service corporations (e.g., 35% rate)

S corporations

Requirements to qualify including election procedure (e.g, Form 2553 election , attachment to return)
Tax law related to S corporation
Treatment of distributions
Shareholder's basis (e.g, loan basis)
Status (e.g., terminated and reinstated)
Debt discharge
Non-cash distributions

Section 2: Business Financial Information (40 items)

Business income

Gross business income
Cost of goods sold (e.g., inventory practices, expenditures included, uniform capitalization rule)
Net income, net operating losses, and loss limitations including passive activity and at risk limitations
Gain or loss on disposition of depreciable property

Business expenses, deductions and credits

Employees' pay (e.g., deductibility of compensation, fringe benefits, rules of family employment, statutory employee, necessary and reasonable)
Reporting requirements for company employees (W-2, W-4, Form 1099)
Business rental deduction
Depreciation, amortization, IRC section 179, and depletion
Business bad debts
Business travel, entertainment, and gift expenses
Interest expense
Insurance expense
Taxes (e.g., deductibility of taxes, assessments, and penalties; proper treatment of sales taxes paid)
Employment taxes
Federal excise tax
Casualties, thefts, and condemnations
IRC section 199 deduction (domestic production activities)
Eligibility and deductibility of general business credits (e.g., welfare-to-work credit, disabled access credit, investment credit)

Business assets

Basis of assets
Disposition of depreciable property
Like kind exchange

Analysis of financial records

What type of business (e.g., service, retail, manufacturer, or farm)
Income statement
Balance sheet
Method of accounting (e.g., accrual ,cash, hybrid, OCBOA)
Depreciation and amortization
Depreciation recovery (e.g., recapture, Sec 280F)
Determination of basis of assets
Shareholder/partner basis
Pass-through activity (e.g., K-1)
Proofing beginning and ending balances
Reconciliation of tax versus books (e.g., M-1, M-2)
Related party activity

Advising the business taxpayer

Filing obligations (e.g., extended returns)
Depositing obligations (e.g., employment tax, excise tax)
Reporting obligations for businesses (e.g. IRC sections 1099 and 1031 exchanges)
Record-keeping requirements (mileage log, cell phone usage, accountable plans)
Related party transactions
Definitions of business entities
Client habits (e.g., personal usage of business accounts, separation of business and personal accounts)
Benefits and detriments of choosing each type of business entity
Advice on accounting methods and procedures (e.g, explanation of requirements)
Transfer elections in or out of the business (e.g., contributed property, distributions)
Life cycle of the business (e.g., startup, decline)
Type of industry (e.g., personal service corporation)

Section 3: Specialized Returns and Tax Payers (15 items)

Trust and estate income tax

Trust types (e.g., grantor, irrevocable, tax shelters)
Distributable net income
Exclusions and deductions
Fraudulent trusts
Income in respect of a decedent
Income

Exempt organizations

Filing requirements (e.g., 1023, 1024, Annual 990)
Qualifications for tax-exempt status (e.g., 501(c)(3))

Retirement plans

Employer contributions
Employee contributions and reporting requirements
Plans for self-employed persons
Prohibited transactions
Qualified plans
SEP and SIMPLE

Farmers

Farm inventory
Depreciation for farmers (e.g., special use)
Various disaster-area provisions
Disposition of farm assets

Part 3 - Representation, Practices and Procedures (100 Items)

Section 1: Practices and Procedures (33 items)

Becoming an enrolled agent

What constitutes practice before the IRS
Categories of individuals who may practice
Enrollment cycle
Period of enrollment
Effective date of renewed enrollment
Enrollment card or other credentials
How to appeal a denial of an application for enrollment
Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries, and Appraisers before the IRS (Treasury Department Circular 230)

Requirements for Enrolled Agents

What information to be furnished to the IRS
When to advise a client about an omission or error on any return, document, or affidavit
Rules for employing or accepting assistance from disbarred or suspended persons and former IRS employees
Rules for restriction on advertising and solicitation and fee information
Concept of due diligence for return accuracy
Concept of conflict of interest
Rules for refund check negotiation
Requirements for tax shelter opinions
Standards for tax return positions and preparing returns
CPE requirements
Scope of authority - Tax court petitions
Effective records
Covered opinions
Tax shelters
Tax avoidance vs. tax evasion
Conference and practice requirements

Sanctions against Enrolled Agents

What constitutes disreputable conduct, which can result in a disciplinary proceeding
Sanctions imposed by OPR against Enrolled Agents
Contents of a complaint filed against an individual, service of complaint and demand for answer requirements
How a proceeding against an individual in violation of regulations governing practice before the IRS is instituted
Procedural rules for conducting proceedings for disqualification
Disciplinary appeal process
Criteria for public disclosures for active and disqualified persons
Types of penalties (e.g., negligence, substantial understatement, overvaluation)
Frivolous submissions (returns and documents)
Fraudulent transactions
Badges of fraud

Penalties

Assessment and appeal procedures for preparer penalties
Penalties to be assessed by the IRS against a preparer for negligent or intentional disregard of rules and regulations, and for a willful understatement of liability
Preparer's due diligence
Rules for furnishing a copy of a return to a taxpayer
Rules for signing returns and furnishing identifying numbers
Rules for keeping copies or lists of returns prepared
Rules for filing an information return concerning employees engaged or employed during a return period
Rules for the preparer penalty involving the earned income credit

Section 2: Representation before the IRS (25 items)

Power of attorney

Acting in place of the taxpayer
Signature authority (e.g., extension of assessment period, closing agreement)
Limitations of authority granted to enrolled agent (e.g. acts authorized)
Prohibition for negotiating taxpayer refund check (e.g. cannot cash or deposit)
Prohibition for signing tax returns
Requirements for power of attorney (Form 2848)
Alternate forms of power of attorney (durable)
Rules for client privacy and consent to disclose
Purpose of filing a tax information authorization
Requirements to be met when changing or dropping representatives
When notices and refund checks may be delivered to recognized representatives
Purpose of a Centralized Authorization File number

Building the taxpayer's case--Preliminary work

What the taxpayer's issue is (e.g. type, details)
Potential for criminal aspects
Competence, expertise and time to handle issue
Taxpayer willingness to sign power of attorney
Conflict of interest

Taxpayer tax information

Income (taxable and non-taxable)
Expenses (deductible, allowable and personal)
Transcripts from IRS
Documentation requirements (e.g., pay stubs, bank statements)
Documentation required (e.g., receipts, invoices)

Taxpayer financial situation

Taxpayer's ability to pay the tax (e.g., installment agreements, offer in compromise)
General financial health (e.g., filed for bankruptcy, lawsuits, and garnishments)
Discharge of the tax liability in bankruptcy (e.g., payroll taxes, filed pre-petition Federal Tax Lien)
Form 433A/B/F
IRS Allowable Living Expenses Standards
Lifestyle and life issues of taxpayer
Cash flow and assets (Cash-T, receipts and disbursements)
Asset fair market value and associated liabilities
Third-party research (e.g., property assessment for municipal taxes; asset values, state and local tax information)
Supporting documentation
Financial documents (e.g., cancelled checks or equivalent, bank statements, credit card statements, receipts)
Legal documents (e.g., birth certificate, divorce decrees, lawsuit settlements)
Prior and subsequent tax returns
Other substantive and contemporaneous documentation (e.g., mileage log, corporate minutes)
Employment reimbursement policies
Business entity supporting documents (e.g., partnership agreement, corporate bylaws)
Brokerage records or individual stock transaction

Legal authority and references

Internal Revenue Code
Treasury regulations
Revenue rulings
Revenue procedures
IRS notices
Case law
IRS publications
Private letter rulings
Form instructions
Internal Revenue Manual
Authoritative source material versus non-authoritative source material

Related issues

Statute of limitations
Post-filing correspondence (e.g., math error notices, under reporting notices)
Deadlines and timeliness requirements
Third-party correspondence (e.g., witness communications, employment records)
Requests for information related to specific issues (e.g., clarification on a tax issue)
Freedom of Information Act requests

Section 3: Specific Types of Representation (25 items)

Representing a taxpayer in the Collection process

Understanding the Collection Process – an overview and notices
Extension of time to pay
Installment capability
Offer in compromise (e.g., doubt as to liability, collectiblility or effective tax administration)
Miscellaneous options (e.g., collection statute end date, collection statute extension date, trust fund recovery penalties, backup withholding) Adjustments to the taxpayer's account (e.g., abatements)
Requesting an audit reconsideration (e.g., documents and forms)
Decedent Issues (get info from Ron(We did not receive this)
Collection appeals program (e.g., denial of installment agreements, discharge applications)
Notice of Federal Tax Lien
Levy and Seizure of taxpayer's property
Collection Appeal Process
Collection due process (e.g., lien and levy)
Case being reported Currently Not Collectable (e.g., reasons and reactivation)
Taxpayer Advocate Service (e.g., criteria for requestion assistance)
IRS Collection Summons (e.g., purposes)
Identity Theft

Penalties and/or interest assessed

Penalties and interest
Basis for having penalties avoided, abated, or refunded
Reasonable cause
Interest abatement
Interest recalculation

Representing a taxpayer in audits/examinations

IRS authority to investigate
Verification and substantiation of entries on the return
IRS opportunity to disagree with filings
IRS authority to fix time and place of investigation
Steps in the process (e.g., initial meeting, submission of IRS requested information)
Innocent spouse
Interpretation of revenue agent report (RAR) (e.g., 30-day letter)
Explanations of taxpayer options (e.g. agree or appeal)
Special procedures for partnership audits (e.g., unified audit procedures for TEFRA)

Representing a taxpayer before Appeals

Protests
Right to appeal revenue agent findings
Request for appeals consideration (e.g., preparation, elements contained)
Enrolled Agent appearance at appeals conference
Settlement function of the appeals process
Issuance of 90-day letter

Higher levels of representation beyond the scope of EA representation

Tax Court
U.S. District Courts and U.S. Claims Court
U.S. Courts of Appeals and U.S. Supreme Court

Section 4: Completion of the Filing Process (17 items)

Accuracy

Using tax software
Inconsistencies with the source data
Miscalculations
Recognition of duplicate entries
Alternative minimum tax issues
Need to read diagnostics
Matching inputs and outputs across forms

Information shared with taxpayer

Record-keeping requirements
Significance of signature (e.g., joint and several liability, penalty of perjury)
Non-taxable income (e.g., combat pay, inheritance)
Consequences of dishonesty

Concerning all tax preparers - regulations and sanctions

Definition of income tax return preparers

Record maintenance

Length of time
Length of time to keep income and employment tax records
The components of the list (name, social security number, and type of return)
EITC due diligence requirements
Rules for returning a client's records and documents

Electronic filing

How to apply to be an e-file provider (e.g., e-services)
Electronic return requirements
Definition of a refund anticipation loan (RAL) indicator
Advertising standards
Definition of EFIN
Definition of ERO
Levels of infractions
Compliance requirements to continue in program (e.g. timely filing, timely payment, and absence of infractions)
Appeal process
Forms 8879 and 8453
Rejected returns and resolution (e.g. client notification)