If you’re considering becoming an Enrolled Agent, you may want to earn your EA credential in 2018 and evaluate an Enrolled Agent Exam Review course. Becoming an Enrolled Agent is perfect if you want to own your own business and have a knack for tax. An EA is federally licensed and can represent taxpayers before the IRS. Enrolled Agents are granted the same client and representation rights with the Internal Revenue Service as that of CPA’s and Attorneys. However, while CPA’s and Attorneys are restricted from practicing in sites where they are not licensed, an EA may represent clients in any state.
Candidates can become Enrolled Agents in one of two ways:
- Pass the Special Enrollment Examination (SEE), the examination the IRS administers through Prometric or,
- Possess the IRS experience and technical expertise deemed appropriate by Circular 230 (currently 5 years).
Unless you’ve been spending some serious time at the IRS, you’re likely looking at taking the SEE in order to become an EA. The SEE (or EA exam) is a three-part exam testing different areas: Individual, Business and Representation, Practice and Procedure. It’s very tax oriented and tests the previous year’s tax laws in the current year’s window.
The EA Exam and the Tax Cuts and Jobs Act
Just like the CPA exam, the Tax Cuts and Jobs Act implemented in December 2017 is having a big impact on the Enrolled Agent exam. The IRS will be rolling out changes to the exam to cover measures in the act at the beginning of the EA exam testing window in 2019. That is, the exam changes won’t take place until May 1st, 2019. The testing window is May 1st, 2019 through February 29th, 2020.
If you’ve been studying for the EA exam review, it might behoove you to earn your EA credential in 2018 by taking the three parts of the exam during the May 1st 2018 through February 28th, 2019 testing window, before the major exam changes are implemented. If the materials you have are for exams within this window, you’ll want to sit for all three parts before the window ends to ensure you don’t have to purchase and learn all new materials for the updated exam.
Retroactive Measures You DO Need to Know for the 2018 Testing Window
There are three issues in the new tax law that are retroactive, which means they pertain to the 2017 tax year. Since the EA exam covers the previous tax year’s laws, these retroactive measures will be testable in the May 2018 through February 2019 testing window. These retroactive measures are as follows:
- Everyone can deduct qualified medical expenses exceeding 7.5% of AGI. The previous law allowed everyone to deduct qualified medical expenses exceeding 10% of AGI; only returns where either spouse was 65 or older were allowed to deduct qualified medical expenses over 7.5% of AGI.
- The new home mortgage limitation applies to mortgages incurred between December 16th 2017 and December 31st Although the limitation only applies to the last 16 days of 2017, it may still be seen on the exam. The acquisition limit decreased from $1,000,000 to $750,000. The $1,000,000 limitation applies through December 15th 2017, so both limitations may be tested.
- After September 27th 2017, the bonus depreciation increased from 50% to 100% of the adjusted basis for qualified property. Between January 1st 2017 and September 27th, 2017, bonus depreciation was 50%. Both bonus depreciation percentages are in addition to the Section 179 deduction. Again, both measures may be tested on the exam since they both applied to 2017.
To recap, all 2017 tax laws (including the three retroactive laws above), may be tested on the SEE exam between May 1st 2018 and February 28th 2019. The good news is, while the Tax Cuts and Jobs Act is going to bring changes, many of the core concepts tested in the exam will be the same. If you won’t be able to test within the current year testing window, don’t worry. Just make sure you get updated testing materials to encompass the new changes, and you’ll be well on your way to becoming an EA.