How do I decide whether a reported payment is taxable income?

Identify what the payment replaces or compensates for, when the taxpayer has a right to it, and whether an exclusion applies. Reconcile information returns to the underlying records. For example, a $900 Form 1099-K payment for an item bought for $1,200 is generally a $300 personal loss, not $900 of taxable profit; a personal loss is generally nondeductible.

Why can a pass-through loss appear on a Schedule K-1 but remain unusable?

The K-1 reports the taxpayer's share of an entity item, but the owner's return applies further limits. Test basis first, then any at-risk limit, passive activity limit, and other applicable restriction. A $30,000 partnership loss with only $18,000 of available outside basis leaves $12,000 suspended at the basis stage, even before later limits are considered.

What does an EA need before responding to an IRS notice for a client?

Identify the notice, tax period, issue, and response deadline; obtain the authority needed for the intended action; and compare the IRS account or return data with the client's records. Form 2848 supports representation for specified matters, while Form 8821 permits access to tax information without representation authority. The notice determines whether the next step is a correction, substantiation, an appeal, or collection relief.

Enrolled Agent SEE: Three-Part Study Guide

Start with concept 1 Choose a topic

An Enrolled Agent needs to reach defensible tax answers and represent taxpayers through IRS procedures. That work starts by identifying the taxpayer, the tax year, and the character of each transaction. A payment can be income, a loan, a return of capital, or a gift; the label on an information return does not settle the question. Business problems add entity rules, accounting methods, basis, and limits on losses. Representation problems require you to match authority and evidence to the notice or collection action at hand. This guide develops those decisions across all three Special Enrollment Examination parts. Its examples use stated assumptions where an annual amount would otherwise be needed, so the calculation and its meaning stay clear.

Part 1: Individuals

1. Reconstruct the taxpayer's starting facts

Start with the taxpayer’s identity, marital status, dependents, and filing history. Compare the prior return with current documents, but treat it as a source of questions rather than an automatically correct template. Carryover schedules may contain capital losses, charitable contributions, passive losses, or other amounts that affect 2025. Verify each amount against its supporting worksheet and any intervening transaction. Read IRS correspondence for adjustments that changed a prior return, payments posted to a different year, or unresolved notices. Then reconcile information returns and ask about income or deductions that produced no form. An identity protection PIN can also affect whether an electronically filed return is accepted. This sequence gives you a reliable opening position before calculating tax. The Part 1 test specifications identify prior returns, personal information, carryovers, and correspondence as preliminary work.

Worked example: A 2024 worksheet shows a $4,000 capital-loss carryover, and 2025 brokerage records show $1,500 net capital gain. First apply $1,500 of the carryover to the gain, leaving $2,500. If there are no other capital items and sufficient ordinary income, that remaining $2,500 can be deducted against 2025 ordinary income under the general annual limit. Confirm the carryover’s character and prior-year computation before entering it.

Watch the distinction: Copying a carryover from last year’s return without checking its worksheet can repeat an earlier error or miss an IRS adjustment that changed the available amount.

Reference: [2]

2. Determine U.S. tax residency

Identify citizenship and immigration facts before deciding which income rules apply. A U.S. citizen generally starts with worldwide income even while living abroad. A noncitizen may be a resident alien under the green-card test or the substantial-presence test; an applicable treaty or special rule may require further analysis. A nonresident alien generally follows different rules for U.S.-source income and income effectively connected with a U.S. trade or business. Residency can change during a year, so dates of arrival, departure, and status changes matter. An ITIN identifies a taxpayer for filing but does not establish immigration status or tax residency. After classifying the person, identify income by source and type. Foreign earned-income exclusions and foreign tax credits are possible relief mechanisms, considered after worldwide income is identified rather than used to decide whether the income exists.

Worked example: A noncitizen holds a green card throughout 2025 and earns $60,000 for work abroad plus $20,000 for work in the United States. The green-card test makes the person a resident alien on these facts. Worldwide earnings entering the initial income analysis are $60,000 + $20,000 = $80,000. Any available exclusion, deduction, or foreign tax credit needs its own eligibility calculation.

Watch the distinction: Foreign earnings do not disappear from a resident alien’s return merely because the work occurred abroad or foreign tax was withheld. Establish residency first, then test relief.

Reference: [2]

3. Choose a defensible filing status

Filing status begins with marital status on the last day of the tax year, including whether a divorce or separate-maintenance decree was final. An unmarried taxpayer usually considers single or head of household. Married taxpayers generally consider joint or separate returns, but a married person who meets the rules for being considered unmarried may qualify as head of household. For head of household, test the qualifying person, where that person lived, and who paid more than half the cost of keeping up the home. Count household costs such as rent, utilities, and food eaten at home; do not confuse the cost test with total support of the child. Compare permissible statuses after eligibility is established, since rates, deductions, credits, and joint liability can differ. A child’s dependency treatment and filing-status role require related but distinct checks.

Worked example: For 2025, a taxpayer has a final separate-maintenance decree, lives with a qualifying child for the required period, and pays $18,000 of $30,000 in home costs. The payment share is $18,000 ÷ $30,000 = 60%, which exceeds half. Assuming the remaining qualifying-person conditions are met, head of household is available; merely living apart would not establish the same marital fact.

Watch the distinction: Paying most of a child’s personal expenses does not prove the head-of-household home-cost test. Calculate the taxpayer’s share of keeping up the home separately.

Reference: [2]

4. Test dependency one condition at a time

Test the qualifying-child route first: relationship, age, residence, support, and joint-return conditions all matter. A full-time student may satisfy a different age condition from a younger child, while a temporary absence for education ordinarily counts as living at home if the home remains the student’s usual residence. The support question asks whether the child supplied more than half of their own support, not whether the parent supplied more than half. If the child route fails, consider qualifying-relative rules, including the relationship or household test, a gross-income test, and whether the taxpayer provided more than half the person’s support. Scholarships received by a full-time student require special handling in the support calculation. Finally, resolve competing claims under the applicable priority rules rather than assuming two households can claim the same person.

Worked example: A qualifying-age full-time student stays at school during term and returns to the parent’s home during breaks. Total support is $20,000; the parent pays $12,000, or 60%. If the other $8,000 was supplied from sources other than the student’s own funds, the student did not provide more than half their own support. The school absence does not by itself break residence.

Watch the distinction: The qualifying-child support test is not a requirement that the parent pay over half. It asks whether the child personally paid over half of total support.

Reference: [2]

5. Reconcile payments and estimated tax

Build a payment ledger by tax year. Include federal withholding, estimated-tax payments, applicable refundable credits, and any prior-year overpayment applied forward. Reconcile those entries to wage statements, payment confirmations, and the IRS account, since a payment made for one year may have been posted to another. Compare total payments with total tax to find the refund or balance due. Then make a separate underpayment analysis: estimated-tax rules examine when required payments were available during the year and whether a safe harbor or exception applies. A return can have a balance due without an underpayment penalty, or a refund while a timing problem remains. The candidate bulletin sets the examination’s calendar-year 2025 reference point; keep the payment year equally explicit in a calculation.

Worked example: Assume 2025 total tax is $14,000, withholding is $9,000, and estimated payments designated for 2025 are $3,500. Payments total $9,000 + $3,500 = $12,500. The balance due is $14,000 − $12,500 = $1,500. That subtraction does not determine a penalty; payment dates, prior-year tax, and any applicable safe harbor must be checked separately.

Watch the distinction: Do not treat a $1,500 balance due as proof of an estimated-tax penalty. The penalty analysis depends on payment timing and applicable exceptions.

Reference: [1]; [2]

6. Classify wages, interest, and dividends

Classify each receipt before adding figures. Wages generally enter gross income as compensation, even if a payer used an unexpected form or failed to withhold. Bank interest is usually taxable unless a specific exclusion applies. Interest from qualifying state or local obligations is generally excluded from federal gross income, although it can matter in other computations or disclosure fields. Ordinary dividends and qualified dividends are both income, but qualified status may change the rate used in the tax calculation. Check holding-period and other requirements instead of relying solely on a brokerage label. Dividend reinvestment does not usually prevent income recognition; it also creates basis in the newly acquired shares. Keeping taxable interest, exempt interest, ordinary dividends, and qualified dividends in separate columns prevents both omission and double counting. The Part 1 study guide is useful for related individual-income examples.

Worked example: For 2025, a taxpayer receives $50,000 wages, $800 taxable bank interest, $300 qualifying municipal-bond interest, and $1,200 qualified dividends included within total dividends. Gross-income items here total $50,000 + $800 + $1,200 = $52,000. The $300 exempt interest is tracked separately. The $1,200 remains income, while its qualified character is preserved for the later tax computation.

Watch the distinction: Qualified dividends are not excluded income. They enter the income calculation, then may receive different tax-rate treatment if the qualification rules are satisfied.

Reference: [2]

7. Look through information-return totals

An information return reports what a payer or payment network observed, not the tax character of every underlying transaction. Match each Form 1099-K entry to invoices, bank deposits, sales records, refunds, and transfers. Compare Forms 1099-NEC and 1099-MISC with the same ledger so a single payment is not counted twice. Business receipts generally enter gross receipts before related business expenses are deducted. Repayment of loan principal is usually recovery of money lent, and a personal-item sale requires a basis comparison to determine gain or loss. A gain may be taxable, while a personal-use loss is generally nondeductible. Request a corrected form when its facts are wrong, but keep records that explain the return even if the payer does not correct it. Reconciliation is a transaction-by-transaction exercise, not a decision to accept or ignore the form’s total.

Worked example: A 2025 Form 1099-K shows $12,000: $8,000 customer payments, $3,000 repayment of personal loan principal, and $1,000 for a personal item bought for $1,400. Business gross receipts are $8,000. The loan principal repayment creates no income. The item’s $1,000 − $1,400 = $400 personal loss is generally nondeductible, so the form’s $12,000 total is not taxable receipts.

Watch the distinction: Reporting the entire Form 1099-K amount as business revenue can overstate income. Omitting the form without a reconciliation can also leave a payer mismatch unexplained.

Reference: [2]

8. Analyze canceled debt

A lender’s discharge can create cancellation-of-debt income because the borrower’s obligation has fallen without an equivalent payment. First establish the amount actually discharged, including whether the borrower was personally liable and whether a settlement, foreclosure, or purchase-price adjustment changes the analysis. Then test statutory exclusions, including bankruptcy and insolvency where applicable. Insolvency is measured immediately before discharge: total liabilities minus the fair market value of all assets, but only if liabilities exceed assets. The insolvency exclusion cannot exceed the discharged amount. Excluded debt may require reducing tax attributes, so exclusion does not always leave future tax positions untouched. A Form 1099-C is evidence of a reported event, not a complete tax calculation. Document the asset and liability values at the relevant moment and analyze any balance still taxable.

Worked example: Immediately before a $15,000 cancellation in 2025, a taxpayer has $40,000 liabilities and assets worth $32,000. Insolvency is $40,000 − $32,000 = $8,000. Assuming the insolvency exclusion applies, $8,000 of discharged debt is excluded and $15,000 − $8,000 = $7,000 remains for income analysis. Check other exclusions and any required tax-attribute reduction separately.

Watch the distinction: Do not measure insolvency using year-end balances after the debt vanished. The comparison uses assets and liabilities immediately before the cancellation.

Reference: [2]

9. Track basis in traditional IRAs

Nondeductible traditional IRA contributions create basis that prevents the same dollars from being taxed again. Track that basis on Form 8606 across years; a custodian’s distribution statement may not know the taxpayer’s aggregate basis. For a distribution, traditional IRAs are generally aggregated, including relevant SEP and SIMPLE IRAs, and the nontaxable share is determined proportionately. Use the year-end value of the aggregated accounts plus distributions during the year, with adjustments required by the form, as the denominator. Multiply the distribution by the basis ratio, then subtract that nontaxable portion from the distribution. The remaining basis carries forward. A taxpayer cannot select only an account containing nondeductible contributions and call its entire payout tax-free. Practice the denominator and basis update with EA practice questions after working through the records.

Worked example: Assume 2025 traditional IRA basis is $20,000, aggregate year-end traditional IRA value is $80,000, and distributions total $20,000, with no other adjustments. The denominator is $80,000 + $20,000 = $100,000. Basis represents 20%, so $20,000 × 20% = $4,000 is nontaxable and $16,000 is taxable. Remaining basis is $20,000 − $4,000 = $16,000.

Watch the distinction: The account from which cash was withdrawn does not alone determine its taxable share. Aggregate applicable traditional IRA balances before applying basis.

Reference: [2]

10. Distinguish retirement transfers from payouts

Follow the money and the type of retirement account. A direct rollover moves an eligible amount from one retirement arrangement to another without the taxpayer receiving it; a properly executed rollover generally avoids current income. A cash distribution from a pre-tax plan is ordinarily taxable unless a rule excludes or rolls over part of it. An indirect rollover has separate timing, eligibility, and withholding consequences. Roth treatment depends on whether a distribution is qualified and whether contributions, conversions, or earnings are being withdrawn. Required minimum distributions generally cannot be rolled over. After identifying the taxable amount, separately ask whether an additional tax on an early distribution applies and whether an exception removes it. Form 1099-R codes help identify the payer’s treatment, but account records and transaction facts control the return’s analysis.

Worked example: In 2025, a worker directs $50,000 from an eligible pre-tax employer plan to a traditional IRA and receives another $10,000 in cash. The direct $50,000 rollover produces no current income on these assumed facts. The $10,000 cash payment is generally taxable, making the initial taxable amount $10,000. Age and any applicable exception determine whether an additional early-distribution tax also applies.

Watch the distinction: Do not treat every retirement-plan payment as a rollover because it came from the same plan. Identify the destination and eligibility of each separate payment.

Reference: [2]

11. Establish property basis

Adjusted basis is the investment used to measure gain or loss on disposition. For purchased property, begin with cost and qualifying acquisition expenses. Add capital improvements that increase value, extend useful life, or adapt the property to a new use. Subtract depreciation allowed or allowable, even when the taxpayer failed to claim a deduction that should have been taken. Gifts can involve carryover basis and special loss-basis rules; inherited property generally starts from a value determined under estate-basis rules, subject to exceptions and elections. These origins cannot be treated interchangeably. After establishing adjusted basis, calculate amount realized from cash and the value of property received, adjusted for selling expenses and relevant liabilities. Gain or loss is the difference. Only then determine whether the result is capital, ordinary, excluded, or subject to depreciation recapture.

Worked example: A taxpayer buys a business asset for $30,000, makes $5,000 in capital improvements, and has $8,000 of depreciation allowed or allowable before a 2025 sale. Adjusted basis is $30,000 + $5,000 − $8,000 = $27,000. With an assumed $40,000 amount realized and no other adjustments, gain is $40,000 − $27,000 = $13,000. Its character requires a separate analysis.

Watch the distinction: Ignoring depreciation because the taxpayer forgot to claim it can overstate basis. Verify depreciation allowed or allowable before computing disposition gain.

Reference: [2]

12. Test a home-sale exclusion

Calculate gain first: amount realized after selling expenses minus adjusted basis. Then test whether the property was the taxpayer’s principal residence and whether the ownership and use requirements are met within the relevant period. Review any prior use of the home-sale exclusion, as well as special rules that may affect a reduced exclusion or certain absences. Ownership and use need not always occur at the same time, but each must satisfy its own rule. Also identify gain attributable to depreciation from business or rental use, which may remain taxable despite an otherwise available exclusion. The exclusion is limited to eligible gain and the applicable ceiling; it cannot create a loss. A home with no taxable gain may still require return reporting when an information return was issued or another reporting condition applies.

Worked example: A 2025 seller has a $500,000 amount realized after selling costs and a $320,000 adjusted basis. Gain is $500,000 − $320,000 = $180,000. Assume all ownership, use, prior-exclusion, and depreciation conditions permit an available exclusion of $200,000. The excluded amount is the lesser of $180,000 gain and $200,000 available exclusion: $180,000. Taxable gain from this sale is zero.

Watch the distinction: An exclusion ceiling is not an automatic deduction from sale proceeds. Compute gain and verify the residence tests before applying the available exclusion.

Reference: [2]

13. Net capital items by character

Classify each capital sale by holding period before netting. Property held for one year or less generally produces short-term gain or loss; a longer period generally produces long-term character. Net short-term items together and long-term items together, then combine results under the capital-gain rules. Character matters because net long-term gain may receive different rates, while a remaining net short-term gain is taxed under ordinary rate rules. Capital losses also face limits when they exceed gains, with permitted carryovers retaining their character. Before putting a transaction into this schedule, check whether a special rule changes it. Depreciation recapture, for example, can convert some gain on depreciable property to ordinary income. Wash-sale rules can defer certain securities losses. The arithmetic is straightforward only after each transaction’s basis, holding period, and character are correct.

Worked example: For 2025, a taxpayer has $7,000 short-term gain and $2,000 short-term loss, giving $5,000 net short-term gain. A separate $3,000 long-term loss offsets $3,000 of that amount. Overall net capital gain is $5,000 − $3,000 = $2,000, retaining short-term character on these facts. The long-term loss does not turn the residual $2,000 into preferentially taxed long-term gain.

Watch the distinction: Netting every sale into one number before classifying holding periods can produce the right total but the wrong tax treatment. Preserve short-term and long-term columns.

Reference: [2]

14. Apply rental and passive-loss limits

A rental’s economic result is receipts minus deductible operating costs and depreciation, but a tax loss is not necessarily currently usable. First classify payments, including advance rent and refundable deposits, and allocate expenses when there is personal use. Next apply basis and at-risk rules where relevant. Rental real estate is generally passive even when the owner works on it, although real-estate-professional rules and other exceptions can change that result. A passive loss generally offsets passive income; an unused amount is suspended and tracked by activity for later years. Certain rental real estate taxpayers may qualify for a special allowance, subject to its own conditions and income limits. A sale or other disposition can change when suspended losses become usable. Keep the loss calculation separate from the limitation calculation so the return and carryover schedule both remain accurate.

Worked example: A 2025 rental collects $24,000, incurs $18,000 deductible operating expenses, and has $9,000 allowable depreciation. The result is $24,000 − $18,000 − $9,000 = a $3,000 loss. Assume no passive income and no applicable exception or allowance. The current passive-loss deduction is zero; the $3,000 is suspended and tracked for potential later use.

Watch the distinction: A negative rental result on Schedule E does not automatically reduce wages. Test passive-loss restrictions and carry forward any disallowed amount.

Reference: [2]

15. Calculate self-employment adjustments

Sole-proprietor profit is the starting point for self-employment tax, subject to the applicable computation rules. That tax is separate from federal income tax. Once self-employment tax is calculated, the deduction for its employer-equivalent portion is an adjustment in arriving at adjusted gross income. It does not go back onto the business schedule to reduce the profit from which the self-employment tax computation began. This ordering prevents a circular calculation. Self-employed health-insurance deductions require their own eligibility and earned-income limits; an HSA deduction has contribution and coverage rules of its own. Neither should be inferred merely from paying a premium or making a deposit. Keep three records distinct: business expenses that determine profit, the self-employment-tax calculation, and personal adjustments that affect adjusted gross income.

Worked example: Assume a 2025 sole proprietor has $40,000 business profit and a correctly computed self-employment tax of $5,600. The deduction for half is $5,600 ÷ 2 = $2,800. With no other items, this adjustment reduces adjusted gross income by $2,800. It does not change the $40,000 business profit used to begin the self-employment-tax computation.

Watch the distinction: Subtracting the half-tax deduction on Schedule C would reduce business profit and distort the self-employment-tax calculation. Claim it at the individual adjustment stage.

Reference: [2]

16. Compare itemized deductions with the standard deduction

Classify potential itemized deductions before comparing them with the standard deduction. Medical expenses face a floor and eligibility rules; state and local taxes have their own restrictions; mortgage and investment interest depend on the debt and use of proceeds. Charitable gifts require qualified recipients and suitable records, with additional rules for noncash property. Personal casualty claims are limited by the rules applicable to the event and year. Apply each category’s restrictions first, then add only the amounts that remain deductible. Compare that total with the standard deduction applicable to the taxpayer’s filing status and facts. The larger amount usually gives the lower taxable income, although special interactions can warrant a full return comparison. Do not treat every household cash outlay as an itemized deduction, and do not use a gross expense total before category limits.

Worked example: For a 2025 calculation exercise, assume the eligible amounts after all applicable limits are $7,000 taxes, $6,000 mortgage interest, and $2,000 charitable gifts. Itemized deductions total $7,000 + $6,000 + $2,000 = $15,000. Assume this taxpayer’s standard deduction for the exercise is $14,000. Itemizing is $1,000 larger and, absent other interactions, reduces taxable income by an additional $1,000.

Watch the distinction: Comparing raw receipts with the standard deduction overstates itemizing. Apply the medical, tax, interest, gift, and casualty rules before totaling eligible amounts.

Reference: [2]

17. Calculate the individual QBI deduction

Qualified business income generally starts with eligible domestic business income from a sole proprietorship or pass-through activity, adjusted for items properly connected with that business. Employee wages are not QBI, and many investment items are excluded unless a specific business connection changes their treatment. Track negative QBI carryovers before computing a positive deduction. A tentative component is generally 20% of eligible QBI, but additional wage, property, and specified-service-business rules may restrict it depending on the taxpayer’s facts. The overall deduction also cannot exceed a limit based on taxable income before the QBI deduction, reduced by net capital gain. This deduction is taken at the individual level; it does not reduce Schedule C profit or self-employment tax. Work through eligible income, carryovers, business-level restrictions, and the overall limit in that order.

Worked example: Assume a 2025 taxpayer has $60,000 eligible QBI, no negative QBI carryover, and facts outside additional wage, property, and service-business restrictions. The tentative amount is $60,000 × 20% = $12,000. Assume the separately calculated taxable-income limitation is $10,000. The allowed QBI deduction is the lesser amount, $10,000, leaving $2,000 of tentative deduction unavailable under this illustration.

Watch the distinction: Twenty percent of business profit is only a starting figure. Excluded income, negative QBI carryovers, and the taxable-income limit can change the allowed deduction.

Reference: [2]

18. Sort credits by eligibility and refundability

Identify the person, expense, and income facts behind each credit before calculating it. A child-related credit depends on the child’s status and identification requirements; a care credit concerns qualifying care that enables work; education credits require eligible education expenses and student facts. Earned-income credit eligibility has its own income, relationship, residence, and due-diligence tests. Premium tax credit calculations depend on coverage and household information, including reconciliation of advance payments. These credits are not interchangeable merely because a dependent appears on the return. Once eligibility and amount are known, classify the credit as nonrefundable, refundable, or partly refundable under its specific rule. Nonrefundable credit can reduce eligible tax to zero but cannot by itself create an overpayment. Refundable credit can exceed remaining tax. A deduction instead reduces the income on which tax is computed.

Worked example: Assume 2025 tax before credits is $2,000. A verified $1,200 nonrefundable credit reduces it to $800. A separate verified $900 refundable credit then offsets $800 and creates a $100 overpayment: $900 − $800 = $100. With no withholding or other payments, the refund is $100. Check each credit’s eligibility independently before using this ordering.

Watch the distinction: A $1,200 nonrefundable credit cannot create a refund when it exceeds remaining tax. Refundability belongs to the particular credit, not to credits as a group.

Reference: [2]

19. Separate gifts, estates, and fiduciary income

Keep the transfer event separate from later income. A gift is a lifetime transfer and may raise donor gift-tax reporting questions; receiving the gift is not automatically the recipient’s income. A decedent’s property may be included in the gross estate under estate-tax rules, whether or not the estate ultimately owes tax. After death, an estate or trust can earn interest, dividends, rent, or sale gain and may have an income-tax return distinct from the decedent’s final individual return. The beneficiary’s reporting depends on what the fiduciary distributes and how the item is characterized. Basis is another separate question: inherited property often uses a value determined at death, subject to applicable exceptions or elections, while gifted property commonly carries a different basis history. Identify the event, taxpayer, tax type, and basis rule before computing anything.

Worked example: A decedent owns an asset valued at $100,000 at death. The estate sells it later in 2025 for $106,000, with no selling costs or intervening basis adjustments. Assuming $100,000 is the applicable inherited-property basis, post-death gain is $106,000 − $100,000 = $6,000. The $100,000 estate value and the estate’s later $6,000 income-tax gain are different tax measurements.

Watch the distinction: Including property in a gross estate does not mean its later sale proceeds are all income. Establish the estate’s basis and calculate only post-death gain.

Reference: [2]

20. Identify foreign income and account reports

A U.S. citizen or resident generally begins with worldwide income, so an overseas account’s interest enters the income analysis even if no U.S. information return arrives. Foreign tax paid may support a credit or deduction, subject to its own limits; it does not erase the receipt. Account reporting is a separate inquiry. FBAR concerns specified foreign financial accounts under its own aggregate-value and filing rules, while Form 8938 concerns specified foreign financial assets under different definitions and thresholds. A taxpayer might need one, both, or neither, based on the actual facts. Interests in foreign corporations, partnerships, or trusts can create still other information-return duties. Gather account ownership, signature authority, maximum values, asset types, and entity interests, then apply each form’s rules independently. Income reporting alone does not satisfy an applicable information-reporting obligation.

Worked example: A U.S. resident earns $10,000 interest in a foreign account during 2025 and pays foreign tax on it. The starting U.S. income analysis includes $10,000 of interest; any foreign tax relief is calculated separately. The account’s maximum value, ownership, and other foreign assets must then be tested under FBAR and Form 8938 rules. The $10,000 income figure alone cannot determine either filing duty.

Watch the distinction: Reporting foreign interest on the income-tax return does not automatically complete foreign-account reporting. FBAR, Form 8938, and entity forms have distinct triggers.

Reference: [2]

Part 2: Businesses

21. Classify the business entity

Start with who owns the business and whether a valid federal tax election changed its default classification. A sole proprietor generally reports business activity on the individual return. A domestic single-member LLC is generally disregarded for income tax purposes, while a domestic LLC with two or more members generally defaults to partnership treatment. An eligible LLC can instead elect corporate treatment; a qualifying corporation may then elect S status. Legal liability protection under state law does not determine the federal income tax return. A partnership generally reports its results on an information return and passes items to partners, while a C corporation generally pays its own income tax. Check election records, ownership changes, and effective dates before choosing forms. The Part 2 test specifications identify entity classification and elections as study topics.

Worked example: In 2025, two people form a domestic LLC, each owning half, and make no corporate election. The LLC defaults to partnership classification for federal income tax. It generally files a partnership information return and gives each owner a Schedule K-1. If the agreement allocates a $40,000 tax item equally and that allocation is valid, each owner reports $20,000 under the applicable owner-level rules.

Watch the distinction: Assuming every LLC files a corporate return confuses state-law form with federal tax classification. Determine the number of owners and any effective election first.

Reference: [3]

22. Build partnership basis at formation

A partner needs an outside basis in the partnership interest, separate from the partnership's inside basis in its assets. At formation, begin with contributed cash and the adjusted tax basis of contributed property, generally without substituting fair market value. Then account for liabilities: relief from a debt reduces the contributing partner's basis, while the partner's resulting share of partnership liabilities increases it. Liability allocations depend on who bears economic risk for recourse debt and the applicable rules for nonrecourse debt. Property contributions can also carry built-in gain or loss that must be tracked for later allocations, even when formation produces no immediate gain. Record the opening basis and debt shares so later distributions and losses can be tested correctly. The Part 2 guide connects this starting balance to subsequent partner-level calculations.

Worked example: In 2025, a partner contributes property with $30,000 adjusted basis and a $10,000 debt that the partnership assumes. Assume the partner's resulting share of partnership liabilities is $4,000 and no other consideration changes hands. Outside basis starts at $30,000, falls by $10,000 of debt relief, then rises by $4,000 of allocated debt: $24,000. The property's market value does not replace its tax basis in this computation.

Watch the distinction: Using the property's appraised value as outside basis can overstate later deductions. Start with adjusted tax basis and account for liability relief and the new debt share.

Reference: [3]

23. Update a partner's outside basis

A Schedule K-1 reports allocations, but it does not establish how much loss a partner may deduct. Keep an annual outside-basis rollforward: begin with opening basis, add contributions and allocated income, account for liability changes, subtract distributions and applicable reductions, then test losses against the remaining basis. Separately stated items may affect the rollforward even when they receive different treatment on the partner's return. A loss stopped by the basis limit is suspended and may become available when basis is restored, subject to other rules. Passing the basis test is only the first gate; at-risk, passive-activity, and other owner-level limits can still defer deduction. Distinguish basis in the partnership interest from the partnership's basis in equipment or inventory, which answers a different question.

Worked example: For 2025, a partner starts with $20,000 outside basis, receives $5,000 of allocated income, and takes an $8,000 cash distribution. Before losses, basis is $20,000 + $5,000 − $8,000 = $17,000. A subsequent $22,000 allocated loss uses the $17,000 basis available; $5,000 is suspended at the basis limit. The allowed portion still faces later owner-level limits.

Watch the distinction: Deducting the entire K-1 loss because it appears on the form skips the partner's basis calculation. A K-1 allocation is not itself proof of deductibility.

Reference: [3]

24. Characterize a partnership-interest sale

On a sale of a partnership interest, amount realized includes cash, the fair market value of other property received, and relief from the seller's share of partnership liabilities. Subtract adjusted outside basis to find total gain or loss. Next, examine the partnership's underlying assets for unrealized receivables and certain inventory items, often called hot assets. The portion attributable to those items is generally ordinary income or loss; the residual generally has capital character. This look-through step prevents a seller from converting the value of ordinary-income assets into capital gain merely by selling the partnership interest. Request a liability schedule and the partnership's hot-asset information, and reconcile them to the final K-1. Sale proceeds alone omit debt relief and can materially understate gain.

Worked example: In 2025, a partner sells an interest for $50,000 cash and is relieved of $10,000 of partnership debt. Amount realized is $60,000. With $35,000 outside basis, total gain is $25,000. Assume the partnership determines that $7,000 is attributable to hot assets. Report $7,000 as ordinary gain and the remaining $18,000 generally as capital gain; the two amounts still total $25,000.

Watch the distinction: Treating all partnership-interest gain as capital ignores the hot-asset look-through rule. Compute total gain first, then separate its ordinary and residual portions.

Reference: [3]

25. Test corporate formation under section 351

Section 351 can defer gain when one or more transferors give property to a corporation solely for its stock and the property transferors control the corporation immediately afterward. Test what each person transfers: stock issued for services is compensation, not stock received for property, and can affect the control analysis. Cash or other property received alongside stock is boot, generally causing recognition up to the lesser of realized gain or boot received. Loss is generally not recognized in the exchange. Liabilities assumed by the corporation need separate analysis, including whether they exceed the transferred property's basis or were shifted for a tax-avoidance purpose. After deciding recognition, determine stock and corporate asset basis using the carryover rules and adjustments. A corporation's issuance of stock does not by itself make every owner's transfer tax free.

Worked example: In 2025, an owner transfers land with $40,000 basis and $70,000 fair market value for stock worth $60,000 plus $10,000 cash. Assume the owner meets section 351's control condition and no liabilities are involved. Realized gain is $70,000 − $40,000 = $30,000. Recognized gain is limited to the $10,000 cash boot. The stock basis is $40,000 + $10,000 recognized gain − $10,000 cash = $40,000.

Watch the distinction: Assuming a qualifying section 351 transfer recognizes no gain overlooks boot. Check cash, other property, services, and liabilities before calculating the deferred amount.

Reference: [3]

26. Trace corporate distributions through earnings and profits

A C corporation's distribution requires an earnings-and-profits analysis rather than a simple comparison with current book profit. Available current and accumulated earnings and profits determine how much of a distribution is a dividend. Any excess generally reduces the shareholder's stock basis to zero; a further excess is generally gain from a stock sale or exchange. Track the distribution date, the shareholder's basis, and any prior distributions. Property distributions add another layer: the corporation may recognize gain as though it sold appreciated property, and that gain can affect earnings and profits. The shareholder measures the distribution using the property's value, reduced as applicable for liabilities. Keep corporate-level consequences distinct from shareholder-level consequences. A cash payment labeled a return of capital is still a dividend to the extent earnings and profits support it.

Worked example: In 2025, assume a C corporation pays a shareholder $30,000 cash, with $18,000 of earnings and profits available for this distribution. The shareholder has $7,000 stock basis. The first $18,000 is dividend income. The next $7,000 reduces stock basis to zero. The remaining $5,000 is generally capital gain, assuming the stock is a capital asset. These portions sum to the $30,000 received.

Watch the distinction: Calling the whole payment a dividend because it came from a corporation ignores the earnings-and-profits limit. Basis can absorb a nondividend portion before gain arises.

Reference: [3]

27. Check S corporation eligibility

An S election is available only when the corporation meets the statutory eligibility conditions and makes a valid election with the required shareholder consents. Check the corporation's domestic status, shareholder types, shareholder count, and capital structure. The one-class-of-stock rule focuses on identical rights to distributions and liquidation proceeds; different voting rights alone need not create a second class. Review governing documents and binding agreements, since a label on a share certificate may not reflect its economic rights. An ineligible shareholder, a second economic class, or an ineffective election can prevent or end S status. If status terminates, the tax consequences and any potential relief require a separate timeline analysis. Do not assume pass-through reporting continues simply because prior-year returns used Form 1120-S.

Worked example: In 2025, a domestic corporation has otherwise eligible owners but issues Class A shares entitled to twice the distributions of Class B shares. Assume those economic rights are binding. The shares differ in distribution rights, so the one-class-of-stock condition is not met. If the classes differed only in voting power while distribution and liquidation rights matched, that voting difference alone would not create the same defect.

Watch the distinction: Treating different voting rights as automatically fatal misses the rule's focus on economic rights. Conversely, equal votes do not cure unequal distribution rights.

Reference: [3]

28. Limit S corporation losses and distributions

An S corporation shareholder tracks stock basis and basis in debt the corporation owes directly to that shareholder. Allocated income and other basis increases, distributions, nondeductible expenses, and losses change those balances under ordering rules. A distribution generally looks first to stock basis; shareholder loan basis does not make an otherwise taxable distribution tax free. For an allocated loss, stock basis is used before qualifying direct debt basis. A guarantee of corporate debt generally does not create debt basis merely because the shareholder might later have to pay it. A loss exceeding available basis is suspended, and a loss that passes basis still faces at-risk, passive-activity, and other limits. Maintain separate annual schedules for stock and each direct loan, especially after repayments or prior reductions in debt basis.

Worked example: For 2025, assume an S corporation shareholder has $12,000 stock basis and $5,000 basis in a direct loan to the corporation, with no intervening adjustments. A $20,000 allocated loss first uses $12,000 stock basis, then $5,000 debt basis. Thus $17,000 passes the basis limit and $3,000 is suspended. The $17,000 may still be restricted by later loss limitations.

Watch the distinction: Adding a guaranteed bank loan to debt basis overstates loss capacity. The shareholder generally needs basis in debt owed directly by the corporation.

Reference: [3]

29. Compute gross profit from inventory

Gross profit starts with net sales, not total deposits. Subtract returns and allowances from gross receipts, then calculate cost of goods sold using beginning inventory plus includible acquisition or production costs minus ending inventory. Inventory timing matters: goods still on hand at year-end generally remain an asset rather than becoming current cost of goods sold. Include freight and other properly capitalized costs when applicable, and use a consistent inventory method supported by records. Once gross profit is known, analyze operating expenses separately; treating the same purchase as both inventory cost and an expense duplicates a deduction. Reconcile quantities and values to purchase invoices, sales records, and the balance sheet. A sudden gross-margin change can signal omitted receipts, inventory errors, pricing changes, or a legitimate shift in product mix.

Worked example: For 2025, a retailer records $120,000 gross receipts and $5,000 returns, so net sales are $115,000. Beginning inventory is $20,000, includible purchases are $70,000, and ending inventory is $25,000. Cost of goods sold is $20,000 + $70,000 − $25,000 = $65,000. Gross profit is $115,000 − $65,000 = $50,000, before rent, wages, and other operating expenses.

Watch the distinction: Deducting every inventory purchase when paid ignores unsold goods at year-end. Ending inventory removes those goods from current cost of goods sold.

Reference: [3]

30. Reconcile books and tax accounting

Book income is a useful control total, but tax income follows tax recognition and deduction rules. Reconcile one item at a time, identifying whether the difference is permanent or temporary. Tax-exempt interest included in book income is removed for tax and ordinarily does not reverse. A nondeductible penalty recorded as a book expense is added back and likewise does not reverse. Depreciation differences often reverse over an asset's life because books and tax recover the same cost on different schedules. Check whether a difference belongs in taxable income, a separately stated pass-through item, or a balance-sheet account. Repeatedly using the wrong tax timing method may require formal accounting-method procedures rather than a one-year plug. The reconciliation should explain both the current return and why book and tax balances diverge.

Worked example: For 2025, a corporation's book income is $100,000 after a $4,000 penalty expense and includes $6,000 of tax-exempt interest. Assume both amounts are correctly classified and no other differences exist. Add back the nondeductible $4,000 and subtract the excluded $6,000: $100,000 + $4,000 − $6,000 = $98,000 taxable income. Both adjustments are permanent under these facts.

Watch the distinction: Equating book profit with taxable income overlooks items that accounting records include but tax law excludes, or book expenses that tax law disallows.

Reference: [3]

31. Substantiate ordinary business expenses

A business payment is deductible only after its purpose, recipient, timing, and character are established. Ordinary and necessary business expenses still face specific limits and substantiation rules. For travel, connect the trip to business activity and retain dates, destination, purpose, and cost records; for vehicles, separate business from personal use with a reliable log. Compensation also needs a real service relationship and reasonable amount. Paying an owner's personal expense from a business account does not convert it into business travel or supplies. Reclassify that payment according to the entity and facts, perhaps as a distribution, compensation, or a bona fide receivable. Then consider any owner-level consequences. Start with the ledger entry, trace the invoice and payment, and ask what the expenditure actually bought.

Worked example: In 2025, a company pays $9,000 from its bank account: $6,000 for documented employee travel to customer meetings and $3,000 for an owner's family vacation. Assuming the travel otherwise meets deduction rules, $6,000 can be evaluated as business expense. The $3,000 is personal and cannot remain in travel expense. Its correct owner-transaction classification depends on the company's tax status and the surrounding facts.

Watch the distinction: A business bank statement proves who paid, not why the payment was made. Personal spending needs owner-level classification even when the company paid it.

Reference: [3]

32. Choose repair or capitalization treatment

Classify work on tangible property by what it does to the relevant unit of property. Spending that merely keeps an asset operating ordinarily may be a current repair. A betterment, restoration, or adaptation to a new or different use generally must be capitalized. Compare the asset's condition before and after the work, and separate distinct projects rather than treating one invoice as a single tax item. A capitalized amount becomes part of basis and is recovered through depreciation when the asset is placed in service, subject to applicable expensing elections and limitations. Routine maintenance and replacement of a major component can produce different answers even when both are called repairs by the vendor. Document the function gained, the work performed, and the asset's prior condition before choosing treatment.

Worked example: During 2025, a business pays $2,000 to restore a machine to ordinary working condition and $18,000 to install a new production function. Assume the jobs and costs are separately documented. The $2,000 is analyzed as a current repair. The $18,000 adapts the machine and is capitalized, increasing its recoverable basis by $18,000. Any 2025 depreciation or expensing deduction requires a separate calculation.

Watch the distinction: Using the invoice's word 'repair' as the tax answer skips the improvement tests. Decide what changed in the asset's function or condition.

Reference: [3]

33. Analyze business-asset dispositions

For a business asset sale, calculate amount realized and adjusted basis before assigning character. Basis generally starts with cost, increases for capital improvements, and decreases for depreciation allowed or allowable. Gain on depreciable tangible personal property may be ordinary to the extent of prior depreciation under section 1245; any remaining gain requires further character analysis. A loss can have a different character from a gain, depending on the asset and holding facts. Also distinguish an outright sale from a qualifying exchange or involuntary conversion, which may change recognition timing. Do not use book value as a substitute for tax basis. Reconcile the fixed-asset ledger, depreciation schedules, sale documents, and any selling costs so the amount and character of gain are both supportable.

Worked example: In 2025, equipment originally cost $50,000, has $30,000 of tax depreciation allowed or allowable, and sells for $35,000 cash with no selling costs. Adjusted basis is $50,000 − $30,000 = $20,000, and gain is $35,000 − $20,000 = $15,000. Assuming section 1245 applies, ordinary recapture is the lesser of $15,000 gain or $30,000 depreciation: $15,000. No gain remains for other character analysis.

Watch the distinction: Calling all business-asset gain capital ignores depreciation recapture. Calculate adjusted basis, total gain, and recapture before assigning the remainder's character.

Reference: [3]

34. Apply business-loss limits in sequence

An activity's economic loss is only the starting figure for an owner's current deduction. First apply rules at the entity and owner level that determine the allocable loss and available basis. Next, the at-risk rules generally limit loss to the amount the owner can actually lose economically under those rules. Then test passive-activity limits, followed by any further applicable individual or business-loss limits. A net operating loss is considered only after the relevant deductions reach the return and the NOL calculation is made. Keep a separate suspended-loss schedule for each limitation because later income, contributions, or changes in exposure may release different amounts. The order matters: a dollar stopped at basis is not tested as an at-risk or passive loss that year. Use EA practice questions to rehearse that sequence.

Worked example: For 2025, assume a partner is allocated a $40,000 activity loss, has $30,000 usable basis, and is at risk for only $22,000 after the basis test. Basis suspends $40,000 − $30,000 = $10,000. The at-risk limit then suspends $30,000 − $22,000 = $8,000 more. The remaining $22,000 reaches the passive-activity test; it is not automatically a current deduction.

Watch the distinction: Calling a $40,000 K-1 loss a $40,000 tax deduction collapses several independent limits. Track where each suspended portion stopped.

Reference: [3]

35. Classify workers and payroll obligations

Worker status depends on the real working relationship, especially the business's right to direct how work is done. Examine behavioral control, financial control, and the parties' relationship together. Relevant facts include instructions, training, equipment, opportunity for profit or loss, investment, benefits, and whether the work forms a continuing part of the business. No contract label or single factor settles every case. If the worker is an employee, the business generally must handle wage withholding, employer employment taxes, wage statements, and deposit obligations. Payments to a genuine independent contractor follow different reporting and tax treatment. Review each role on its own facts, including any statutory employee or special industry rule that may apply. A classification error affects both payroll reporting and the worker's individual return.

Worked example: In 2025, a firm sets a technician's hours, supplies all tools, trains the technician in its required method, and supervises each job. The written agreement calls the technician a contractor. The firm's control over the work strongly supports employee classification, though all relationship facts should be reviewed. If classified as an employee, wages enter payroll withholding and employment-tax reporting rather than being treated solely as contractor payments.

Watch the distinction: A signed contractor agreement describes the parties' preference, not the federal tax result. Examine actual control and economic independence before selecting payroll treatment.

Reference: [3]

36. Map business reporting duties

Map reporting duties by transaction, recipient, and payment method before selecting a form. Employee compensation points toward payroll records and a wage statement. Payments for services to a nonemployee may call for an information return, depending on the payee, amount, and other reporting exceptions. Certain cash transactions have their own reporting analysis. An information return does not create a deduction; the underlying business purpose, amount, and documentation still matter. Conversely, a deductible payment can remain deductible even when a separate reporting duty was missed, subject to consequences for that omission. Keep owner withdrawals and personal bills out of vendor expense accounts, then classify them under the entity's owner rules. Reconcile general-ledger totals with payroll, contractor, and payment-platform records to catch duplicates and omitted reports.

Worked example: During 2025, a business pays an owner's $4,000 personal bill and pays $6,000 for documented services from an outside contractor. The $4,000 is an owner transaction, not an operating deduction. The $6,000 may be a business expense if otherwise allowable. Its information-return treatment depends on the contractor's tax classification, how payment was made, and the applicable reporting rules.

Watch the distinction: Issuing an information return does not prove an expense is deductible. Reporting and deduction are separate decisions supported by different facts.

Reference: [3]

37. Allocate mixed-use rental property

For property used personally and rented to others, first count actual rental-use and personal-use days under the applicable rules. Then classify receipts, including advance rent and deposits that the owner may keep. Allocate shared expenses using an appropriate method, while tracing costs used solely for rental or personal purposes directly. A dwelling used as a residence can face a rental-deduction ceiling and special ordering rules; vacation-home limits must be checked before treating a computed rental loss as deductible. After that, any allowable rental loss may face passive-activity limits. Distinguish days the property was available for rent from days actually rented when a rule calls for rental-use days. A day-count fraction is a useful allocation step, but it does not by itself establish the final deduction.

Worked example: For 2025, assume a dwelling has 90 actual rental-use days and 30 personal-use days. A $12,000 expense is properly allocable by those 120 use days. Rental use is 90 ÷ 120 = 75%, so $9,000 is allocated to rental use and $3,000 to personal use. Because the 30 personal days also require a residence-use analysis, the $9,000 allocation is not automatically fully deductible.

Watch the distinction: Applying the rental-use percentage and stopping there overlooks vacation-home deduction limits and, where relevant, passive-loss limits. Allocation precedes deductibility.

Reference: [3]

38. Trace trust and estate income

A trust or estate is a separate income-tax taxpayer unless grantor-trust rules attribute its items to an owner. For a nongrantor trust or estate, distinguish fiduciary accounting income under the governing instrument from taxable income under federal law. Corpus is principal, but a distribution of cash labeled principal can still carry out taxable income under distributable-net-income rules. DNI generally limits the income distribution deduction and the income included by beneficiaries, while preserving relevant character, such as interest or dividends, in the beneficiary's Schedule K-1. Determine the trust type, governing distribution terms, tax year, and separately stated items before allocating tax. A distribution larger than DNI is not automatically fully taxable to the beneficiary. Likewise, undistributed DNI generally remains in the entity's tax analysis rather than disappearing.

Worked example: For 2025, assume a nongrantor trust has $20,000 of DNI and distributes $12,000 under terms that carry out income. Assume no other distributions or character adjustments. The beneficiary's K-1 carries $12,000 of the applicable income items. The remaining $8,000 of DNI is evaluated in the trust's taxable income after its deductions; it is not added to this beneficiary's income merely because the trust earned it.

Watch the distinction: Treating every trust payment as tax-free principal ignores DNI. Determine whether the distribution carries out income and retain that income's character.

Reference: [3]

39. Evaluate exempt organizations and retirement plans

Tax-exempt status does not mean every receipt escapes income tax or every activity is permitted without reporting. For a trade or business regularly carried on outside the organization's exempt purpose, identify gross income and directly connected expenses, then test exclusions and the unrelated-business-income rules. Maintain separate records so the organization can support both exempt operations and unrelated activity. Retirement plans raise a different set of questions: distinguish employer from employee contributions, determine whether a plan is qualified, and check eligibility, nondiscrimination, prohibited transactions, and reporting duties. A contribution's deductibility does not establish that the plan is properly operated. When studying these topics, ask which entity owes tax, which person receives a deduction or deferral, and what separate filing or operational rule applies.

Worked example: In 2025, a charity operates a shop regularly, and assume the shop is unrelated to its exempt purpose. It earns $8,000 and incurs $3,000 of directly connected costs. Tentative unrelated-business income is $8,000 − $3,000 = $5,000 before applicable deductions and exclusions. The charity's exempt status does not erase that result; whether tax or a filing is due requires the remaining rules.

Watch the distinction: Assuming an exempt organization never computes taxable business income overlooks unrelated activities. Classify the activity and its directly connected costs separately from donations.

Reference: [3]

40. Recognize farm-specific tax items

Farm records need classification before a net-income calculation. Crop and livestock sales, crop-insurance proceeds, government program payments, patronage distributions, and proceeds from selling breeding livestock can have different timing or character. Inventory and depreciation treatment also depend on what the farmer produced or acquired and how an animal or asset was used. Crop-insurance proceeds are generally part of the income analysis, although a qualifying farmer may have a deferral option when the required facts are met. Farm rental arrangements require another decision: participation in production can affect the form and self-employment treatment. Separate ordinary farm operating receipts from asset dispositions, then match expenses and depreciation to the correct activity. For this study cycle, the Candidate Information Bulletin identifies calendar-year 2025 as the default question year.

Worked example: For 2025, a farmer receives $30,000 from crop sales and $8,000 of crop-insurance proceeds, and incurs $25,000 of allowable farm operating expenses. Initial net farm income is $30,000 + $8,000 − $25,000 = $13,000 before depreciation or any valid deferral. Nothing in these facts establishes eligibility to defer the insurance proceeds, so omitting the $8,000 would understate the initial calculation.

Watch the distinction: Ignoring crop-insurance proceeds because they replace a lost harvest omits a farm receipt. Analyze any deferral only after checking its separate conditions.

Reference: [1]; [3]

Part 3: Representation, Practices and Procedures

41. Define the EA's practice authority

An enrolled agent’s federal enrollment permits practice before the IRS, including communicating with examiners, presenting evidence, and advocating a taxpayer’s position. Preparing a return is a separate activity: signing a return as its paid preparer does not, by itself, authorize representation in an examination. Likewise, access to confidential tax information requires the taxpayer’s permission or another lawful basis. For a particular IRS matter, identify the taxpayer, tax type, period, and act proposed, then check the authorization. Court appearances involve a further distinction. Enrollment alone does not admit an EA to practice before a federal court; that court’s admission rules govern who may appear. The Part 3 test specifications address practice privileges and judicial limits as separate topics. Read a scenario by locating its forum and the authority needed there.

Worked example: A taxpayer asks an EA who prepared a 2025 return to answer an IRS examiner’s proposed adjustment. The EA first obtains representation authority covering the taxpayer’s 2025 income tax, then may discuss records and advocate at the IRS examination. If the dispute later enters federal court, the existing EA enrollment and IRS authorization do not establish court admission. The taxpayer needs someone authorized under that court’s rules.

Watch the distinction: Do not treat return preparation, permission to see a transcript, IRS representation, and court admission as one privilege. Each permits different acts and may require different authority.

Reference: [4]

42. Correct known errors with due diligence

Due diligence means testing information that appears incomplete, inconsistent, or implausible before relying on it. Compare the client’s account with bank deposits, information returns, prior returns, and business records; ask what each unexplained difference represents. A deposit may be a loan, transfer, or customer payment, so a mismatch calls for inquiry rather than an automatic income adjustment. If the inquiry establishes omitted revenue on a return being prepared, correct the return before signing it. If an error appears on an already filed return, promptly tell the client what the error is and explain the possible tax and penalty consequences. The practitioner cannot silently revise a prior filing, and client refusal does not make an unsupported current position acceptable. Keep a record of the question, evidence, conclusion, and advice given.

Worked example: For 2025, a client reports $40,000 in receipts, while bank records show another $6,000 deposited by customers. Invoices and bank descriptions confirm those deposits were payments for completed work, with no duplication in the $40,000 ledger total. Gross receipts are therefore $40,000 + $6,000 = $46,000. The EA corrects the draft return and investigates whether the same bookkeeping problem affected an already filed year.

Watch the distinction: An information mismatch is a reason to investigate, not proof that every deposit is taxable. Once records establish omitted customer revenue, accepting the client’s lower figure fails due diligence.

Reference: [4]

43. Resolve conflicts of interest

A conflict exists when representing one client would be directly adverse to another, or when duties to a client are materially limited by duties to someone else or by the practitioner’s own interests. Start by identifying each client and the specific positions they need advanced. Then ask whether competent, diligent representation remains reasonably possible and whether the representation is otherwise permitted. Where the rules allow the conflict to be managed, each affected client must give informed written consent. Consent follows a candid explanation of the conflict and its practical effects; a signature alone cannot cure an unmanageable conflict. Consider confidentiality as well: information received from one client cannot simply be used for the other. If independent judgment or necessary advocacy would be compromised, decline or withdraw from the conflicting representation.

Worked example: Two former partners each ask the same EA to contest an IRS allocation of $50,000. Each says the other received the entire amount. Their positions are directly adverse, and confidential records from either file may bear on the dispute. The EA assesses whether both can receive diligent representation and whether informed written consent is feasible. If the EA cannot advocate each position independently, the EA declines the joint engagement.

Watch the distinction: Do not assume two clients can consent to any conflict. Written consent matters only when the practitioner can reasonably provide competent, diligent representation and the arrangement is otherwise permitted.

Reference: [4]

44. Apply fee and client-record rules

Evaluate a fee arrangement by its substance, not its label. A fee must not be unconscionable, and contingent fees for matters before the IRS face specific restrictions; do not assume that making payment depend on a refund is routinely allowed. Advertising must avoid misleading claims about qualifications, results, or special influence. Record requests present a different duty. When a client needs records they supplied, return those records promptly so the client can meet federal tax obligations, even if a fee remains unpaid. Distinguish original client material from practitioner work product and from copies retained to document the engagement; the applicable rules may treat them differently. Make a record of what was returned, preserve confidential copies securely where permitted, and pursue an unpaid bill through ordinary fee channels rather than using essential records as leverage.

Worked example: A client owes $2,000 and requests original receipts to answer an IRS examination notice. The EA identifies the originals, makes permissible copies for the engagement file, and promptly returns the originals. The $2,000 remains a separate fee dispute. Withholding the receipts could prevent the client from substantiating deductions, so the unpaid balance does not justify delaying their return.

Watch the distinction: A practitioner’s unpaid invoice does not turn client-supplied originals into collateral. Fee rules and record-return duties must be analyzed separately, even when the dispute concerns the same engagement.

Reference: [4]

45. Support return positions and written advice

A defensible return position begins with established facts, applicable law, and a clear account of uncertainty. Ask what happened, when it happened, who paid, what records exist, and which legal rule makes the item deductible or taxable. Written advice must consider relevant facts and law rather than adopt a client’s preferred description or an unsupported assumption. Disclosure can affect how a position is evaluated, but it does not convert a factual invention into a permissible claim. If records are incomplete, request them or narrow the advice to stated, reasonable assumptions that are identified as assumptions. For a return, evaluate the position under the applicable preparer standard and any disclosure requirement before signing. Keep the distinction between a doubtful legal interpretation and a missing fact: legal authority addresses the former, while evidence is needed for the latter.

Worked example: A client describes a $15,000 family vacation as market research. The itinerary lists sightseeing and family activities, with no meetings, research notes, or business schedule. The EA cannot substantiate a $15,000 business deduction from that label. The EA asks for contemporaneous evidence of any identifiable business activity; absent support, the 2025 return excludes the vacation expense as a business deduction.

Watch the distinction: Do not use disclosure or carefully worded advice to mask a missing business purpose. A tax position needs support for its underlying facts as well as its legal treatment.

Reference: [4]

46. Meet practitioner and firm duties

Practitioner duties attach to both the individual signer and, where relevant, the firm’s procedures. A paid preparer who must sign a return uses the required preparer identifying number, gives the taxpayer a copy, and maintains the required return records. An EA must also keep enrollment and continuing education obligations in view. Supervision is substantive: a reviewer should check whether staff gathered adequate facts, classified items correctly, and resolved software warnings or obvious duplications. A supervisor’s signature cannot substitute for review of a return assembled by someone else. When a recurring error appears, investigate the process that produced it and correct affected work as appropriate. Prompt handling of IRS matters and honest dealings with the agency remain part of practice duties even when preparation tasks are delegated.

Worked example: A staff member enters the same $5,000 expense twice on a 2025 return, and the supervisor notices the duplicate before filing. Removing one entry reduces deductions by $5,000 and increases taxable income by $5,000, assuming no other changes. The supervisor checks the source ledger, reviews the revised tax calculation, and gives the client a corrected return to review before signing it.

Watch the distinction: Delegating data entry does not delegate away supervisory responsibility. A valid identifying number and a supervisor’s signature do not cure an obvious duplicate deduction left on the filed return.

Reference: [4]

47. Choose the right taxpayer authorization

Form 2848 appoints an eligible representative to act before the IRS for specified tax matters and periods. Form 8821 authorizes a designee to inspect or receive tax information, but it does not make that person the taxpayer’s advocate. Choose by the act required: obtaining a transcript may call for information access, while arguing an examination adjustment requires representation authority. Complete the taxpayer identity, representative identity, tax description, periods, and any limits carefully; a general wish to “handle taxes” is not a substitute for defined coverage. Check whether an earlier authorization remains in effect and whether it should be revoked or limited. Authorization does not automatically permit every act, particularly signing a return for the taxpayer. Carry this distinction into examinations, appeals, and collection work in the Part 3 study guide.

Worked example: A client wants an EA to obtain a 2025 transcript and argue that an examination adjustment is wrong. Form 8821 could provide information access, but it would not authorize the advocacy. A properly completed Form 2848 naming the EA and covering the client’s 2025 income tax permits representation on that matter. The EA still checks any stated limits before agreeing to a specific document.

Watch the distinction: Do not choose Form 8821 merely because it grants access to the same records the EA needs. Reading tax information and speaking for the taxpayer are distinct powers.

Reference: [4]

48. Respect authorization limits and privacy

Read an authorization as a set of boundaries. Match the taxpayer, tax type, form or matter, and period against the IRS request before speaking or signing. A power of attorney may permit some agreements or consents within its stated scope, subject to its terms, but signing a taxpayer’s return has separate restrictions and is not a routine consequence of Form 2848. Where a new matter falls outside the document, obtain authority for that matter before acting. Privacy is a parallel obligation: having access to tax information for one engagement does not allow disclosure to another person or use for an unrelated purpose without a lawful basis. Confirm the identity and authority of the recipient, share only information needed for the authorized task, and keep records and transmissions secure.

Worked example: An EA holds Form 2848 for a client’s 2025 income-tax examination. An IRS employee calls about the client’s 2023 payroll taxes and asks the EA to discuss an assessment. The existing document identifies a different tax matter and period. The EA does not represent the client on the payroll issue until appropriate authority is obtained; access to the 2025 file does not expand that authority.

Watch the distinction: A power of attorney is not an unlimited permission slip. The tax period and matter control its reach, and authority to represent does not automatically include return-signing authority.

Reference: [4]

49. Build the taxpayer's factual case

Build a case around the exact proposed adjustment. Read the notice and account or wage-and-income transcript to identify the payer, year, amount, and code involved. Then compare source documents with the taxpayer’s ledger and bank activity. Contemporaneous contracts, invoices, cancellation records, and correspondence can explain why an information return differs from actual income; a later recollection alone may be weaker. Prepare a short reconciliation showing every component of the difference and attach records that prove it. Check whether an apparently civil dispute suggests intentional concealment or another issue beyond the EA’s competence, and seek appropriate specialist help when needed. The goal is an evidentiary chain from transaction to reported amount, not a large packet of unrelated records.

Worked example: For 2025, a payer reports $70,000 while the client’s ledger shows $50,000. The payer confirms that a $20,000 invoice was canceled before payment and issues a corrected statement for $50,000. Bank deposits also total $50,000 from that payer. The reconciliation is $70,000 original report minus $20,000 canceled invoice = $50,000 received, directly addressing the IRS mismatch.

Watch the distinction: Do not answer a precise information-return discrepancy with an unorganized stack of records. Identify the $20,000 difference and prove why the original reported amount was wrong.

Reference: [4]

50. Rank tax authorities

Begin with the governing statute, then examine valid regulations interpreting it and any controlling case law for the relevant jurisdiction. Published revenue rulings and procedures can explain IRS positions or procedures, while forms, instructions, and publications often provide useful summaries. Their convenience does not give them the same force as a statute or regulation. A private letter ruling generally addresses its requesting taxpayer and should not be treated as a broadly controlling rule for someone else. The Internal Revenue Manual describes agency operations but does not itself replace substantive law. Compare authorities by date, factual fit, jurisdiction, and whether later developments changed the rule. When sources seem to conflict, isolate the precise legal proposition and read the higher, more directly applicable authority in context.

Worked example: A client’s transaction appears deductible under a sentence in an IRS publication, but a regulation describes an exception covering the client’s facts. The EA reads the statute and regulation, verifies that the exception applies, and does not claim the deduction based only on the publication’s general summary. The written analysis explains the transaction facts and the controlling exception, rather than treating all IRS documents as equal authority.

Watch the distinction: Do not rank tax sources by how easy they are to read. A simplified publication may omit an exception that appears in the governing statute or regulation.

Reference: [4]

51. Read notices against time limits

A notice is useful only after its procedural identity is clear. Identify the taxpayer, tax period, proposed or assessed amount, issue, notice date, and stated response method. An underreporting proposal, examination report, statutory deficiency notice, collection notice, and payment adjustment can create different choices and deadlines. Also keep separate the periods for assessment, filing a refund claim, and collection; they do not all begin or end with the same event. Check whether the notice proposes a change or records one already made, since that affects the response. Preserve proof of timely mailing or submission and note any deadline while the facts are gathered. Match evidence to the year under review, then decide whether to explain, amend, pay, appeal, petition, or seek an account correction.

Worked example: An IRS notice questions a 2025 receipt, but the client supplies an invoice from 2024. The EA first confirms that the notice concerns 2025 income and records its response deadline. The 2024 invoice does not reconcile the 2025 amount. The EA requests 2025 invoices, payment records, and any corrected payer statement, then chooses the procedure shown by the notice rather than sending the unrelated receipt.

Watch the distinction: Do not assume every IRS letter allows the same response or the same amount of time. Read the notice type and tax year before selecting evidence or procedure.

Reference: [4]

52. Substantiate an examination issue

Substantiation links a claimed tax item to reliable records and the rule that allows it. For an expense, establish payment, amount, business purpose, and any required allocation; a canceled check may prove payment but not business use. Reconcile logs, receipts, statements, and returns so that totals can be traced. The IRS can request records and examine relevant facts, while the taxpayer generally needs evidence for claimed deductions. An EA should identify gaps early and distinguish records that exist from estimates or recollections. Limited practitioner privilege can protect qualifying tax advice in specified noncriminal settings, but it is not a blanket shield over underlying transaction facts or ordinary source documents. Present the supported amount, explain unresolved differences, and correct an unsupported claim when evidence cannot be obtained.

Worked example: A 2025 return claims $9,000 of business vehicle costs. Mileage and expense records substantiate $6,000 attributable to business use, while $3,000 has no identified trips or business purpose. The EA presents the $6,000 calculation and supporting logs. Unless further reliable evidence establishes the remaining $3,000, the client cannot defend that portion of the claim; other deduction limits may still affect the $6,000.

Watch the distinction: A payment record alone does not prove business use. Nor can practitioner privilege turn missing mileage logs or receipts into substantiated deductions.

Reference: [4]

53. Interpret examination findings

Read an examination proposal one adjustment at a time. Identify the return line, examiner’s factual reason, legal theory, proposed tax effect, and any related penalty or interest. Recompute the examiner’s arithmetic and compare each claim with the taxpayer’s records. An examination report or correspondence proposal is not necessarily the final stage of the dispute, so distinguish agreeing to a factual correction from accepting every proposed adjustment. Separate items that are fully supported, partly supported, and unsupported; give the examiner a schedule that ties evidence to the disputed amount. If the taxpayer disagrees, state the factual and legal grounds clearly and preserve the available response or appeal route. Avoid signing an agreement until the client understands its scope and consequences.

Worked example: An examiner proposes disallowing $12,000 of 2025 expenses. Receipts and payment records support $8,000, leaving $12,000 - $8,000 = $4,000 without support. The EA responds with a schedule and records for the $8,000, disputes that portion of the disallowance, and tells the client that the $4,000 requires additional evidence or acceptance of the adjustment.

Watch the distinction: Do not accept or contest a report only as a single total. One proposed adjustment may contain a supported portion and an unsupported portion requiring different responses.

Reference: [4]

54. Choose an appeals route

An examination appeal and a response to a statutory deficiency notice occupy different procedural stages. After an examination proposal, an administrative appeal can ask IRS Appeals to consider disputed facts, law, and litigation hazards. A statutory deficiency notice instead carries a court-petition route with its own deadline; sending an ordinary protest does not necessarily preserve that right. Read the letter received, identify the disputed adjustments, and calendar its actual response date before drafting. A useful appeal states the taxpayer’s position, the amount contested, the facts supported by records, and the legal grounds, while acknowledging items the taxpayer accepts. The EA may represent a client at an IRS Appeals conference under proper authority, but court representation has separate admission rules. EA practice questions can help you rehearse which stage a notice describes.

Worked example: An examiner proposes a $7,000 expense adjustment. The taxpayer accepts $2,000 but has records supporting the other $5,000, so the contested amount is $7,000 - $2,000 = $5,000. The EA’s administrative appeal identifies the $5,000 issue, attaches the records, and requests reversal of that portion. The EA also checks the letter’s deadline and whether a later deficiency notice changes the required route.

Watch the distinction: Do not assume that asking Appeals to review an examination proposal preserves every later court right. The notice type and its specific deadline control the next procedural step.

Reference: [4]

55. Assess collection ability to pay

Collection analysis starts with an accurate picture of available resources. Verify recurring income, allowable necessary living and business expenses, asset values, secured debts, and other claims. Monthly cash flow suggests possible installment capacity, while realizable asset equity may affect both the amount and collection option. Expenses claimed by the taxpayer are not automatically allowable for this purpose; compare them with the applicable collection framework and document any special circumstances. If the taxpayer can make sustainable payments, an installment arrangement may be appropriate. If current resources cannot support payments, currently-not-collectible treatment may be considered, although the liability remains and circumstances can later be reviewed. Do not infer inability to pay solely from a large balance or a low bank balance on one day. Reconcile the financial statement to supporting records before proposing a resolution.

Worked example: Assume monthly income of $4,200 and allowable necessary expenses of $3,900. Apparent monthly payment capacity is $4,200 - $3,900 = $300. An EA could begin an installment analysis at $300 per month, then examine asset equity, variable income, and collection rules. If the $300 depends on an expense estimate that is understated, the proposal needs revision before submission.

Watch the distinction: A $300 monthly surplus is an analytical starting point, not an automatic installment amount or proof that currently-not-collectible treatment is unavailable.

Reference: [4]

56. Evaluate an offer in compromise

An offer in compromise asks the IRS to settle a liability for less than its full amount on an available legal ground. For an inability-to-pay case, estimate collectible asset equity and future payment capacity using the applicable method, then compare that collection potential with the proposed offer. Investigate ownership, liens, exemptions, income stability, and unusual expenses because each can change the estimate. Filing and payment compliance also matter to eligibility and evaluation. A taxpayer’s preferred affordable figure alone does not establish what the government could reasonably collect. If the offer is below calculated collection potential, identify a supported reason, such as an error in the asset valuation or a qualifying special circumstance, rather than concealing the gap. Distinguish an offer from an installment agreement, which pays a liability over time, and from currently-not-collectible status, which suspends active collection under qualifying circumstances.

Worked example: Assume collectible equity of $8,000 and a future-income component, calculated under the problem’s stated assumptions, of $6,000. Illustrated collection potential is $8,000 + $6,000 = $14,000. A $5,000 offer falls $9,000 below that figure. The EA investigates whether valuation, income assumptions, or special circumstances justify the difference; affordability alone does not resolve it.

Watch the distinction: Do not treat an offer as a discount chosen from the tax balance. Its amount must be evaluated against collectible resources and the grounds for compromise.

Reference: [4]

57. Respond to liens and levies

A federal tax lien is the government’s legal claim against a taxpayer’s property arising from an unpaid tax liability; a notice of lien makes that claim public in specified settings. A levy is a collection act that takes property or rights to property, such as funds in a bank account. The distinction matters because a lien filing and a proposed levy may trigger different notices, hearing rights, and response windows. Read the exact notice and its date before choosing collection due process, another collection appeal, a payment proposal, or a challenge to the underlying balance where permitted. Confirm whether the IRS has merely proposed action or already taken it. Gather account transcripts, proof of payment, financial information, and ownership records relevant to the remedy. An appeal request should identify the action challenged and a workable alternative, not merely object to collection in general.

Worked example: A taxpayer receives a notice proposing a bank levy, while a Notice of Federal Tax Lien was filed earlier. The lien concerns the government’s claim against property; the proposed levy concerns taking funds. The EA records the proposed-levy notice date, checks its stated hearing or response procedure, and evaluates payment or other collection alternatives. Responding only to the earlier lien filing would miss the immediate levy issue.

Watch the distinction: Do not call a lien filing a seizure of the bank account. A levy is the taking action, and its particular notice determines the immediate procedural choice.

Reference: [4]

58. Analyze trust-fund recovery exposure

The trust-fund recovery penalty can impose personal liability on a responsible person who willfully fails to collect, account for, or pay over trust-fund employment taxes. Those taxes include amounts withheld from employees, such as income tax withholding and the employee share of employment tax; the employer’s own share is distinct. Responsibility depends on actual authority over financial decisions, such as deciding which creditors are paid, not job title alone. Willfulness can arise when a person knows the taxes are unpaid yet directs available funds to other creditors. Examine bank authority, payroll decisions, correspondence, and timing to determine both elements. Calculate the trust-fund amount separately from the business’s total payroll debt, and consider each potentially responsible person individually. Payment to suppliers may keep operations running, but it does not resolve the withheld-tax obligation.

Worked example: A manager controls payroll disbursements, knows that $20,000 withheld from employees remains unpaid, and directs available cash to suppliers instead. Those facts support inquiry into both responsibility and willfulness. The possible personal assessment concerns the $20,000 trust-fund amount stated here, not automatically every component of the employer’s payroll liability. The EA examines payment authority and records before advising the manager.

Watch the distinction: Do not equate a manager’s title with responsibility or the employer’s entire payroll balance with the trust-fund amount. Actual control, knowledge, and tax components matter.

Reference: [4]

59. Separate tax corrections from penalty relief

Choose a correction by locating the error. If the filed return misstates income or deductions, an amended return may be needed. If tax was computed correctly but a payment was not credited, seek an account adjustment with proof of payment. A refund claim addresses an overpayment and must satisfy its own timing rules. Penalty abatement concerns whether a penalty should stand; interest usually follows the corrected tax and payment history, while separate interest relief has narrower grounds. Review the account transcript chronologically: assessment, payment dates, credits, penalties, and interest postings. Correcting the principal tax or credit can require recalculation of related charges, but it does not automatically erase every charge. State the requested action and evidence for each component so the IRS can address the actual account problem.

Worked example: An account shows $1,500 tax, $200 penalty, and $40 interest. A canceled check and payment record prove an uncredited $1,500 payment for that liability. Crediting it reduces the displayed $1,500 tax balance to $0, assuming no other transactions. The EA asks the IRS to post the payment on its actual date and recalculate the $200 penalty and $40 interest accordingly; any remaining charge needs separate analysis.

Watch the distinction: Do not amend a correct return solely to fix an unposted payment. Also do not promise that correcting the tax balance automatically removes all penalties and interest.

Reference: [4]

60. Control the filing and record trail

A reliable filing trail connects source records, return entries, software calculations, taxpayer review, authorization, transmission, and acceptance. Check the completed return for duplicate entries, inconsistent carryovers, missing forms, and results that do not fit the facts. The taxpayer’s e-file authorization must relate to the return actually transmitted; a material correction after signing calls for renewed review and proper authorization. Transmission alone is not acceptance. Monitor acknowledgments, investigate a rejection code, correct the cause with the taxpayer’s input when needed, and transmit again through the appropriate process. Retain required copies, authorizations, and support securely, with access limited to those who need them. Documentation should let the EA explain what was filed, when it was accepted, and how a later correction was handled.

Worked example: Software enters a $4,000 deduction twice on a 2025 return, and the client signs an e-file authorization based on that draft. Removing the duplicate decreases deductions by $4,000 and increases taxable income by $4,000 before the tax is recomputed. The EA reviews the corrected figures with the client, obtains authorization for the corrected return, transmits it, and confirms acceptance rather than treating the earlier signature or transmission as completion.

Watch the distinction: Do not transmit a materially changed return under an authorization based on earlier figures. A software calculation and a transmission confirmation also do not replace review or acceptance tracking.

Reference: [4]

Official references and further reading

All study guides

Choose your exam version

EA SEE Part 1

EA SEE Part 2

EA SEE Part 3

Part 1: Individuals

1. Reconstruct the taxpayer's starting facts

2. Determine U.S. tax residency

3. Choose a defensible filing status

4. Test dependency one condition at a time

5. Reconcile payments and estimated tax

6. Classify wages, interest, and dividends

7. Look through information-return totals

8. Analyze canceled debt

9. Track basis in traditional IRAs

10. Distinguish retirement transfers from payouts

11. Establish property basis

12. Test a home-sale exclusion

13. Net capital items by character

14. Apply rental and passive-loss limits

15. Calculate self-employment adjustments

16. Compare itemized deductions with the standard deduction

17. Calculate the individual QBI deduction

18. Sort credits by eligibility and refundability

19. Separate gifts, estates, and fiduciary income

20. Identify foreign income and account reports

Part 2: Businesses

21. Classify the business entity

22. Build partnership basis at formation

23. Update a partner's outside basis

24. Characterize a partnership-interest sale

25. Test corporate formation under section 351

26. Trace corporate distributions through earnings and profits

27. Check S corporation eligibility

28. Limit S corporation losses and distributions

29. Compute gross profit from inventory

30. Reconcile books and tax accounting

31. Substantiate ordinary business expenses

32. Choose repair or capitalization treatment

33. Analyze business-asset dispositions

34. Apply business-loss limits in sequence

35. Classify workers and payroll obligations

36. Map business reporting duties

37. Allocate mixed-use rental property

38. Trace trust and estate income

39. Evaluate exempt organizations and retirement plans

40. Recognize farm-specific tax items

Part 3: Representation, Practices and Procedures

41. Define the EA's practice authority

42. Correct known errors with due diligence

43. Resolve conflicts of interest

44. Apply fee and client-record rules

45. Support return positions and written advice

46. Meet practitioner and firm duties

47. Choose the right taxpayer authorization

48. Respect authorization limits and privacy

49. Build the taxpayer's factual case

50. Rank tax authorities

51. Read notices against time limits

52. Substantiate an examination issue

53. Interpret examination findings

54. Choose an appeals route

55. Assess collection ability to pay

56. Evaluate an offer in compromise

57. Respond to liens and levies

58. Analyze trust-fund recovery exposure

59. Separate tax corrections from penalty relief

60. Control the filing and record trail

Official references and further reading

Frequently Asked Questions

Related Study Guides

NASAA Uniform Securities Agent State Law Exam (Series 63)

Accredited Business Valuation (ABV)

Accredited Estate Planner (AEP)