EA Part 2 study guide
EA Part 2 · Work through your exam, one topic at a time.
EA Part 2, formally the Businesses section of the IRS Special Enrollment Examination, is one of the three computer-based multiple-choice tests that candidates must pass to become an Enrolled Agent - a tax practitioner authorized to represent taxpayers before the IRS. Part 2 is aimed at practitioners who advise or prepare returns for entities: sole proprietors, partnerships, S corporations, C corporations, trusts, estates, and the individuals who own or work in them. The exam is organized around five content areas: business entities and considerations; business tax preparation and taxpayer filing requirements; specialized returns and taxpayers; tax accounting methods and inventories; and business income, deductions, and credits. Expect computational problems as well as conceptual ones - basis and distributions, depreciation and cost recovery, inventory rules, employment tax, and entity-level credits all appear. The EA Part 2 study guide has 5 sections and about 1,480 words.
01Business Entities and Considerations
A candidate must be able to move fluidly between default classifications and elective ones. An unincorporated single-owner entity is by default a disregarded entity; a multi-owner unincorporated entity is by default a partnership.
325 words, about 2 min02Business Tax Preparation and Taxpayer Filing Requirements
Match the entity to the return and the deadline. Partnerships file Form 1065, S corporations Form 1120-S, and C corporations Form 1120.
281 words, about 1 min03Specialized Returns and Taxpayers
Fiduciaries file Form 1041. Know the distinction between the entity's taxable income and the distributable net income that limits the deduction for distributions.
278 words, about 1 min04Tax Accounting Methods and Inventories
Taxpayers adopt an overall method: cash, accrual, or a hybrid, plus special methods for particular items. Accrual taxpayers follow the all-events test and economic performance rules, and certain related-party accruals are deferred until paid.
282 words, about 1 min05Business Taxation and Income, Deductions, and Credits
Start with the broad definition of gross income and then carve out exclusions: life insurance proceeds, gifts, certain municipal bond interest, and qualified fringe benefits. The trap is treating a reimbursement or a loan proceeds receipt as income, or excluding an item that is merely tax-deferred rather than excluded.
314 words, about 2 min