Tax Law Changes 2018 on the Enrolled Agent Exam

Brace yourself! The newest tax law changes are coming to the Special Enrollment Exam (SEE), also known as the Enrolled Agent (EA) exam.

The Tax Cuts and Jobs Act (TCJA), signed into law in December 2017, has triggered substantial changes to the EA exam that you should be aware of. One of the bill’s stated goals was to make taxes simpler for taxpayers; however, the bill has actually made things a little more difficult for EA candidates.

There is new information you need to know for the May 1, 2019–February 28, 2020 testing window, but don’t stress! We’re going to go over all the tax law changes you need to know about for the EA exam.

How do the 2018 tax law changes affect the 2019 enrolled agent exam?

Exam Schedule

On any given year, the EA exam only tests up to the previous year’s tax laws. This is (partially) true in 2019.

NOTE: Due to the recent government shutdown and an unusual delay, new tax laws will not be tested beginning May 1, 2019 as they normally would. Instead, the IRS will continue to offer the current EA exam from May 1 – June 30, 2019, and the revised exam (covering TCJA) will not be offered until July 1, 2019.

To reiterate, tax laws that were in effect in 2018 will be tested beginning in 2019, but not until July 1.

Despite these unusual circumstances, Gleim is making sure you get all of the information you need to succeed. We’ve got you covered!

Exam Content

The scale of the recent tax law changes should not be underplayed; we haven’t seen an overhaul like this since the Tax Reform Act of 1986, 32 years ago. The TCJA makes some significant changes to the U.S. tax code. These changes will be reflected in testable content on the EA exam, which requires you to understand current tax law. The largest changes are discussed below.

  1. The TCJA eliminates personal exemptions. This is a huge change for the individual taxpayer. Before the TCJA, you could claim a $4,050 deduction from your taxable income. That essentially meant, for example, if you made $30,000 in 2017, you could claim a $4,050 deduction and only be taxed on $25,950. The new law does away with the personal exemption altogether. Now, without considering other deductions, that $30,000 you made is taxed at the full amount.

  2. The TCJA raises the standard deduction substantially. For example, the standard deduction for single taxpayers went from $6,350 in 2017 to $12,000 under the new law.

  3. The new law shifts individual income tax brackets around. Most people are getting tax breaks, the biggest of which go to households in the top 5% for income.

Filing Single Tax Bracket

2017

2019

$0-$9,325

10%

$0-$9,700

10%

$9,326-$37,950

15%

$9,701-$39,475

12%

$37,951-$91,900

25%

$39,476-$84,200

22%

$91,901-$191,650

28%

$84,201-$160,725

24%

$191,651-$416,700

33%

$160,726-$204,100

32%

$416,701-$418,400

35%

$204,101-$510,300

35%

Over $418,401

40%

Over $510,300

37%

 

  1. The new law also introduces a flat 21 percent corporate tax rate. This constitutes a tax cut for any business with income greater than $50,000, and a tax increase for businesses with income less than $50,000.

  2. The TCJA increases the 50% first-year bonus depreciation to 100% for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. The deduction for Section 179 is taken before any bonus depreciation, and any deduction for bonus depreciation is taken before the regular depreciation is recalculated.

  3. Very few people will pay the Alternative Minimum Tax (AMT) under the TCJA due to a few major changes: higher exemption levels, higher exemption phaseout levels, and fewer tax breaks that would trigger the AMT. These changes expire after 2025, so the AMT will simply return to the way it behaves now after that.

There are also changes to:

  • Alimony

  • Several major tax credits

  • Depreciation and amortization

  • Estate tax

  • Gift tax

  • Nonrecognition transactions

  • Entertainment expenses

  • Net Operating Loss

  • Maximum deduction for Sec. 179 property

  • Taxable year of inclusion

  • Cash method of accounting

  • Inventory accounting

  • Many other areas that affect the EA exam

You might find all this information frustrating, and we understand. As the EA exam experts, we are constantly working to ensure that you have the information you need to pass the EA exam:

  • The 2018 Gleim EA Review

    • Covers everything you need to know if you are testing before July 1, 2019

  • The 2019 Gleim EA Review

    • Covers everything you need to know if you are testing on or after July 1, 2019

When will the rest of the law be testable?

The tax law changes will become testable on the EA exam beginning July 1, 2019. The particulars of the law and explanations of its affects are rather detailed; reviewing all of it would make this post into a textbook and, to be frank, that’s what the Gleim EA Review is for. We have updated our material with plenty of time for you to prepare for the changes.

Along with including the 2018 tax law changes, we’ve modified our EA Review with all of the other tax law changes that will be testable during the upcoming testing window and incorporated feedback from candidates. We update our courses every year so you’re always equipped for EA exam success.

2018 Tax Law Changes on the EA Exam

Testing Window

May 1, 2019 – February 29, 2020

What will be testable?

  • May 1, 2019 – June 30, 2019
    All tax laws that applied prior to 2018 (unrevised exam)

  • June 1, 2019 – February 29, 2020
    All tax laws that applied to 2018, including the entirety of the Tax Cuts and Jobs Act

Should I take the exam now before the revised exam is released in July?

This is a tricky question. First and foremost, we don’t want you to rush to finish every part of the exam if you don’t have enough time to be well prepared. Studying enough is the most important factor in your success.

That said, pass any Parts you can before July 1, 2019 if

  • You have already passed one or more Parts

  • You have already thoroughly studied for one or more Parts

  • You were planning and prepared to finish your exams before July 1, 2019

Plan carefully and continue studying with Gleim now and you can be done before the revised exam is offered beginning in July.

We generally recommend taking Part 3 last. The candidate feedback we’ve received indicates that the topics covered in Parts 1 and 2 relate to the topics that Part 3 tests, so you need to be knowledgeable about the topics in Part 1 and Part 2 in order to pass Part 3. Consequently, you’ll have an easier time studying for Part 3 once you already are familiar with the topics in Parts 1 and 2.

NOTE: though we normally recommend taking Part 3 last, right now is a good time to take Part 3 first. Although the exam is changing, Part 3 has changed the least, therefore studying for Part 3 will be useful no matter which version of the exam you take.

Gleim prepares you for it all

A lot of tax laws have changed. When July 1 arrives, the whole law will become testable, so EA candidates will have to learn new content for all 3 exam parts. If you stick with Gleim through it all, we’ll provide you with everything you need to know exactly when you need to know it.

Our Enrolled Agent Review Course features the most comprehensive coverage and the largest test bank of exam-quality questions on the market. If something is on the Enrolled Agent exam, you’ll review it with Gleim. See how well Gleim will prepare you by trying our free EA exam questions now. They include detailed answer explanations, a score broken down by topic, and a highly realistic exam experience. You’ll be well on your way to passing the EA exam when you get started with Gleim today!