Enrolled Agent exams

 

IRS SEE Exams to become an Enrolled Agent (EA):

https://www.irs.gov/tax-professionals/enrolled-agent-news

See publications 17 and 334 on desktop and the summaries of those publications below.  Immediately below is what is new for 2026.

The "What's New" sections in publications 17 and 334 are the most critical pages of these publications for exam purposes. For the 2026 EA Exam cycle (testing window July 1, 2026 – February 28, 2027), the exam is based on the Internal Revenue Code as amended through December 31, 2025.

The 2025 "One Big Beautiful Bill" (OBBBA) significantly altered the landscape by making many temporary rules permanent and introducing new deductions. Here is the condensed "5-page summary" of the most testable changes.

Part 1: Individuals (Focus of Publication 17)

The exam focuses heavily on how these new deductions interact with Adjusted Gross Income (AGI).

• New "Big Three" Deductions (2025/2026):
• No Tax on Tips: Qualifying taxpayers can deduct tips up to $25,000/year. This applies to those with AGI below $150k ($300k joint).
• Overtime Deduction: Qualified premium overtime pay is now deductible for certain hourly and salaried workers to boost take-home pay.
• Senior Deduction (Age 65+): A new additional deduction of $6,000 per individual ($12,000 for couples where both are 65+). This is in addition to the standard deduction and is available even if the taxpayer itemizes.
• Standard Deduction & Brackets:
• The 2017 tax rates and brackets have been made permanent.
• For 2025 (the tax year tested), the Standard Deduction is $15,750 (Single) and $31,500 (Joint).
• Itemized Deduction Shifts (SALT):
• The $10,000 SALT cap was increased to $40,000 for taxpayers with incomes up to $500,000.
• Family Credits:
• Child Tax Credit (CTC): Increased to $2,200 per child (up from $2,000) and is now adjusted for inflation.
• Adoption Credit: Now partially refundable for eligible families.

Part 2: Businesses (Focus of Publication 334)

The exam will test your knowledge of how these changes impact cash flow and reporting for sole proprietors and small businesses.

• QBI Deduction (Section 199A):
• The 20% Pass-Through deduction has been made permanent.
• New Minimum: A "floor" deduction of $400 now exists for businesses with at least $1,000 of income, helping very small micro-businesses.
• 1099-K Reporting Threshold:
• The threshold has reverted to the older, higher limits: $20,000 in gross payments AND 200+ transactions. This is a major change from the previously planned $600 threshold.
• Depreciation & R&D:
• Bonus Depreciation: Restored to 100% for qualifying capital investments (reversing the scheduled phase-down).
• R&D Expenses: Businesses can now immediately deduct domestic research and experimental expenses rather than amortizing them over five years.
• Vehicle Deductions:
• Car Loan Interest: Taxpayers can now deduct up to $10,000/year in interest for new, qualifying vehicle loans (subject to income limits).

 

Publications 17 summary:

IRS Publication 17, "Your Federal Income Tax for Individuals," is the definitive guide for individual tax returns. For the Enrolled Agent (EA) exam, it serves as the primary source for Part 1.

Below is a high-level summary of its core sections, updated for the 2026 exam cycle (reflecting the 2025 tax year laws).

1. The Fundamentals: Filing Information

This section determines if and how a person should file.

• Filing Status: Rules for Single, Married Filing Jointly (MFJ), Married Filing Separately (MFS), Head of Household (HoH), and Qualifying Surviving Spouse.
• Dependents: The "Relationship, Age, Residency, and Support" tests for Qualifying Children and the "Member of Household, Gross Income, and Support" tests for Qualifying Relatives.
• Standard Deduction: Significant 2026 cycle values: $16,100 (Single/MFS), $32,200 (MFJ), and $24,150 (HoH).

2. Gross Income: What is Taxable?

Pub 17 breaks down what the IRS considers "income."

• Wages & Salary: Standard compensation, plus the new 2026 deduction for qualified tips (up to $25k) and overtime pay.
• Interest & Dividends: Taxable vs. tax-exempt interest (Schedule B).
• Retirement & Social Security: Rules for IRA distributions, 401(k)s, and the taxability of Social Security benefits.
• Other Income: Gambling winnings, jury duty pay, and the new Form 1099-DA requirements for digital assets (crypto).

3. Adjustments to Income (The "Above-the-Line" Deductions)

These reduce a taxpayer's Gross Income to arrive at Adjusted Gross Income (AGI).

• Student Loan Interest: Deduction for interest paid on qualified loans.
• IRA Deductions: Rules for traditional IRA contributions.
• Health Savings Accounts (HSA): Deductions for contributions to high-deductible health plans.

4. Itemized Deductions (Schedule A)

If a taxpayer's expenses exceed the Standard Deduction, they use this section.

• Medical & Dental: Expenses exceeding 7.5% of AGI.
• Taxes Paid: The SALT cap (State and Local Taxes) is significantly higher for this cycle ($40k for most).
• Interest Paid: Mortgage interest and the new deduction for personal car loan interest (up to $10k).
• Charitable Contributions: Rules for cash vs. non-cash donations.

5. Tax Credits: Direct Reductions of Tax

Credits are "dollar-for-dollar" reductions in tax liability.

• Non-Refundable: Child and Dependent Care Credit, Mortgage Interest Credit.
• Refundable: Earned Income Tax Credit (EITC), and the newly refundable portion of the Adoption Credit (up to $5,120).
• Child Tax Credit: Increased to $2,200 per child for this cycle.

6. Taxpayer Rights & Procedures

• Taxpayer Bill of Rights: The 10 fundamental rights every taxpayer has when dealing with the IRS.
• Audits & Appeals: How the IRS selects returns for examination and the process for challenging an IRS decision.

Study Strategy for EA Part 1

Publication 17 follows the flow of Form 1040. When studying, keep a copy of Form 1040 next to you; the chapters in Pub 17 usually correspond directly to specific lines on the tax return.

Publication 334 summary for sole proprietors: 

IRS Publication 334, "Tax Guide for Small Business," is the primary resource for Part 2 of the EA exam. While Publication 17 covers individuals, Pub 334 focuses on sole proprietorships and statutory employees who report income on Schedule C.

For the 2026 exam cycle, here is the essential summary of its core chapters and "must-know" concepts:

1. Filing & Paying Business Taxes

This section defines who the guide is for and how they interact with the IRS.

• Self-Employed Status: Defined as anyone carrying on a trade or business as a sole proprietor or independent contractor.
• Identification Numbers: Understanding when a Social Security Number (SSN) is sufficient versus when an Employer Identification Number (EIN) is required.
• Self-Employment (SE) Tax: For 2026, the maximum net earnings subject to the Social Security portion is $184,500. You must pay SE tax if your net earnings were $400 or more.

2. Accounting Periods & Methods

The EA exam heavily tests these foundational rules.

• Accounting Periods: Difference between a Calendar Year (Jan–Dec) and a Fiscal Year (any 12-month period ending on the last day of a month other than December).
• Accounting Methods: * Cash Method: Income is reported when received; expenses are deducted when paid.
• Accrual Method: Income is reported when earned; expenses are deducted when the liability is incurred (the "all-events test" and "economic performance").
• Inventories: Small business taxpayers (average annual gross receipts below a certain threshold) may have simplified rules for inventory and capitalization.

3. Dispositions of Business Property

This chapter covers what happens when you sell or exchange business assets.

• Gain or Loss: How to calculate the adjusted basis and the amount realized.
• Section 1231 Gains: Understanding the favorable tax treatment for assets used in a trade or business.
• Depreciation Recapture: Rules for taxing gains at ordinary rates to the extent of prior depreciation deductions.

4. Business Income (Schedule C)

• Gross Receipts: Total income before any deductions.
• Cost of Goods Sold (COGS): Calculation of Beginning Inventory + Purchases - Ending Inventory.
• 1099-K Reporting: For 2026, the threshold remains at $20,000 and 200 transactions.

5. Business Expenses: What is Deductible?

To be deductible, a business expense must be both ordinary (common in your field) and necessary (helpful for your business).

• Section 179 Deduction: For 2026, the limit for immediate expensing of equipment is significantly high (check Form 4562 for the exact inflation-adjusted figure).
• New 2026 Deductions: * Car Loan Interest: A new deduction for qualifying passenger vehicle loan interest.
• R&D Expensing: Ability to immediately deduct domestic research expenses instead of amortizing them.
• Meals & Travel: Rules for the 50% limit on business meals and the strict recordkeeping required for travel.

Study Tip: The "Boundary" Rule

A common trap on the EA exam is confusing which entity Pub 334 covers. Publication 334 does NOT cover Corporations (Pub 542) or Partnerships (Pub 541). If a question asks about a Form 1065 or 1120, the rules in Pub 334 generally do not apply.

Mastering Schedule C is essential for Part 2 of the EA exam because it is the "bridge" between personal and business taxation. On the exam, you aren't just asked about the rules; you are often asked where a specific dollar amount belongs on the form.

Here is a breakdown of the most frequently tested lines and the "traps" the IRS likes to set for each:

Part I: Income

• Line 1 (Gross Receipts): This is where you report total sales. The Trap: The exam often includes "Sales Tax collected" in this number. You must remember to deduct the sales tax paid to the state to arrive at the correct gross receipt figure.
• Line 4 (Cost of Goods Sold): You will almost certainly have to calculate this manually.
  Formula: Beginning Inventory + Purchases + Labor/Materials - Ending Inventory = COGS.
  

Part II: Expenses (The Core of Part 2)

• Line 9 (Car and Truck Expenses): You must know the difference between the Standard Mileage Rate and Actual Expenses.
• Standard Rate: You only need the business miles.
• Actual: You need gas, oil, insurance, and depreciation.
• The Trap: If a taxpayer uses the standard rate, they cannot also deduct gas or insurance—those are already baked into the rate.
• Line 13 (Depreciation and Section 179): Heavily tested. For 2026, remember that Bonus Depreciation is back at 100%. If a question asks for the "maximum deduction," you usually apply Section 179 first, then Bonus, then MACRS.
• Line 24b (Deductible Meals): Generally limited to 50%.
• The Trap: The exam loves to give you a "total meal expense" of $1,000 and ask for the deduction. The answer is $500.
• Line 30 (Business Use of Home): You must know the Simplified Method ($5 per sq. ft, max 300 sq. ft = $1,500 max) vs. the Actual Expenses (mortgage interest, utilities, etc., based on the percentage of the home used).

Part III: Cost of Goods Sold

• Line 33 (Method of Valuation): Usually Cost, Lower of Cost or Market (LCM), or Other.
• Inventory Rules: You may be asked if a small business with receipts under $30 million (the 2026 inflation-adjusted threshold) can treat inventory as non-incidental materials and supplies.

Part 2 and part 3 of the SEE exams also cover other types of companies eg partnerships and corporations.  

Publication 541 (Partnerships): Essential for understanding basis and distributions.

IRS Publication 541: Partnerships

This guide covers any entity that files Form 1065. The exam focuses heavily on the "flow-through" nature of these entities.

• The Entity vs. Aggregate Concept: A partnership is not a taxable entity; it’s a conduit. Income/losses flow to partners via Schedule K-1.
• Basis Calculations (Critical): You must know how to calculate a partner's Outside Basis.
• Increases: Cash contributed, adjusted basis of property contributed, and the partner's share of partnership liabilities.
• Decreases: Distributions, losses, and decreases in partnership liabilities.
• Separately Stated Items: The exam tests your ability to distinguish between "Ordinary Business Income" and items that must be listed separately because they affect partners differently (e.g., Charitable Contributions, Section 179 deductions, and Capital Gains).
• Guaranteed Payments: Payments to a partner for services or capital that are made without regard to the partnership's income. These are deductible by the partnership and ordinary income to the partner.

Publication 542 (Corporations): Covers the formation and taxation of C-corps.

IRS Publication 542: Corporations

This covers C-Corporations (Form 1120). Unlike partnerships, these are separate taxable entities.

• Double Taxation: Understanding that profits are taxed at the corporate level and again at the individual level when paid out as dividends.
• Formation (Section 351): This is a high-yield exam topic. Usually, transferring property to a corporation is tax-free if the transferors control 80% of the stock immediately after the exchange.
• Dividends Received Deduction (DRD): A corporation can deduct a percentage of dividends received from other domestic corporations to prevent triple taxation.
• Filing Deadlines: Generally the 15th day of the 4th month after the tax year ends (April 15 for calendar year corps).

Publication 535 (Business Expenses): A deep dive into what is (and isn't) deductible, which is a frequent topic on the exam.Publication 334 summary for sole proprietors: 

IRS Publication 535: Business Expenses (Discontinued)

Important Note for your 2026 Study: The IRS officially discontinued Publication 535 after the 2022 revision. The material was split into other guides. For the 2026 exam, you should use the following replacements:

• General Expenses: Refer to Publication 334 (which we already summarized).
• Travel, Gift, and Car Expenses: Refer to Publication 463. On desktop. 
• Self-Employed Health Insurance: Refer to Form 7206.  On desktop.  

Core Principles from the "Old" Pub 535 (Still Tested):

Even though the document is gone, the "rules of the road" for deductions remain:

• Capital vs. Expense: If an item provides a benefit lasting more than one year (like a new roof or machinery), it must be capitalized (depreciated) rather than expensed.
• R&D Costs: For 2026, domestic research and experimental costs must be immediately deducted (a change from the 5-year amortization rule that was briefly in place).
• Interest Limitation: Large businesses are limited on how much interest they can deduct, but "small" businesses (those with average receipts under ~$30 million for the 2026 cycle) are generally exempt from this limit.

These are two of the most technically demanding topics in the EA Part 2 syllabus. Both involve the concept of "Basis," but the mechanics differ significantly between Corporations and Partnerships.

1. Section 351 Exchanges (Corporations)

Section 351 allows you to form a corporation without immediately paying taxes on the gain of the property you contribute. It is a "deferral" mechanism, not a permanent exemption.

The Three Requirements for Tax-Free Treatment

To qualify for non-recognition of gain, you must meet all three "pillars":

1. Property: You must contribute property (cash, real estate, inventory, equipment). Trap: Services (like legal or accounting work) are not property. If you receive stock for services, that stock is immediate taxable income.
2. Stock Only: You must receive back only stock of the corporation.
3. The 80% Control Test: The group of people contributing property must own at least 80% of the total voting power and 80% of all other classes of stock immediately after the transfer.

The Impact of "Boot"

If the corporation gives you anything other than stock (like cash or a corporate note), that is called Boot.

• The Rule: You must recognize gain to the extent of the lesser of:
1. The actual realized gain on the property.
2. The Fair Market Value (FMV) of the boot received.

Shareholder's Basis Calculation

Your basis in the new stock is not the FMV; it is a "substituted basis" calculated as:

Adjusted Basis of Property Contributed > plus Gain Recognized (from Boot) minus Boot Received (Cash/FMV of other property) minus Liabilities assumed by the corporation = New Stock Basis

2. Partnership "Outside Basis"

In a partnership, your basis is dynamic—it changes constantly as the business operates. This is called Outside Basis.

The Starting Point

• Contribution: Cash + Adjusted Basis of property contributed.
• Purchase: If you bought into the partnership, your starting basis is the purchase price plus your share of liabilities.

The "Dynamic" Adjustments (IRC Section 705)

Think of your basis like a bank account balance. It goes up and down based on the partnership's activity reported on your Schedule K-1:

• Increases (+): * Additional contributions.
• Your share of taxable income and tax-exempt income.
• Increases in partnership debt (this is a key difference from Corporations).
• Decreases (-): * Distributions of cash or property (at adjusted basis).
• Your share of losses and non-deductible expenses (like half of business meals).
• Decreases in partnership debt.

The Role of Debt (Recourse vs. Nonrecourse)

This is a frequent "level 3" exam question.

• Recourse Debt: Debt for which a partner is personally liable. This increases the basis only for the partners who are "at risk" for it (usually General Partners).
• Nonrecourse Debt: Debt secured only by property (like a mortgage). This is generally allocated to all partners based on their profit-sharing ratio.

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FREE EA EXAM QUESTIONS:

https://www.irs.gov/tax-professionals/enrolled-agents/sample-special-enrollment-examination-questions-and-official-answers

https://www.gleim.com/enrolled-agent-review/free-questions/

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The IRS also provides guidance for preparing tax returns in Publication 15  and Publication 17  and outlines the regulations for practicing before the IRS in Circular 230 

See desktop for PDF copies of all those publications. 

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