Part 1 - Individuals - Taxation And Advice

This section of the exam covers material regarding taxation, how individuals can minimize their tax burden through adjustments, deduction and credits, and how Enrolled Agents can advise individual taxpayers.

This section includes information regarding some of the various types of taxes for which a taxpayer may be liable and that may affect his or her tax return. Enrolled Agents should understand the role of taxation and how to calculate tax liabilities for a federal income tax return. Different topics include:

  • Alternative Minimum Tax
  • Credit for prior year minimum tax
  • Penalties and exceptions on premature distributions from qualified retirement plans and IRAs
  • Household employment taxes
  • Self-employment tax – rates and exemptions
  • Excess social security withholding
  • Conditions for filing a claim for a refund
  • Underpayment penalties and interest
  • Tax provisions for members of the clergy

Advising the Individual Taxpayer
An Enrolled Agent, by definition, is a federally licensed tax practitioner with technical expertise in the field of taxation. Enrolled Agents advise, represent and prepare tax returns for individuals (and other entities). In addition to tax preparation and taxpayer representation, Enrolled Agents may also offer services such as accounting and bookkeeping, financial planning and budgeting, payroll services and financial statement preparation. All Enrolled Agents specialize in taxes (unlike attorneys and certified public accountants) and receive their right to practice from the United States government. As an Enrolled Agent, you may be responsible for advising taxpayer clients on a wide variety of tax-related topics, including:

  • Education planning – lifetime learning credit,529 plans
  • Estate planning – gift versus inheritance, trusts, family partnerships, charitable giving, long-term care, life insurance
  • Marriage and divorce – divorce settlements, common law, community property
  • Property sales –  home, stock, businesses
  • Reporting obligations individuals
  • Retirement planning – annuities, beneficiary ownership, employer plans, IRAs, etc.
  • Items that will affect future returns - carryovers, net operating loss, Schedule D, Form 8801
  • Injured spouse
  • Innocent spouse
  • Estimated tax
  • Adjustments, deductions, and credits for tax planning
  • Use of capital gain rates versus ordinary income rates - character of transaction
Specialized Returns For Individuals
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