ENROLLED AGENT EXAM PREP PART 2 2026
STUDY GUIDE COMPLETE REPRESENTATION
PRACTICE AND IRS PROCEDURE QUESTIONS
◉ Resident Alien. Answer: If either the green card test or the
substantial presence test is met. Even if the taxpayer does not meet
either of these tests, (s)he may be able to choose to be treated as a
U.S. resident for part of the year.
◉ Green Card Test. Answer: A taxpayer is a resident for tax purposes
if (s)he was a lawful permanent resident (immigrant) of the United
States at any time during the year
◉ Substantial presence Test. Answer: A taxpayer is considered a U.S.
resident if she/he was physically present in the US for at least (1) 31
days during 2018 and 183 days during 2018, 2017, and 2016,
counting all days of physical presence in 2018 but only 1/3 of days
in 2017, and 1/6 of days in 2016
◉ Provisional Income threshholds for exclusion of SS Benefits from
Income. Answer: MFJ -- 32,000 to 44,000
All Others-- 25,000 to 34,000
MFSLT -- 0
,◉ What is excluded from gross income in the case of insurance
proceeds?. Answer: Disability pay (excluded)
Accident insurance proceeds. sub for lost income (excluded)
Damages for emotional distress (included if no physical injury)
Punitive damages (included)
Gross income does not include benefits specified that might be
received in the form of disability pay, health or accident insurance
proceeds (even if benefits are a substitute for lost income), workers'
compensation awards, or other damages for personal physical injury
or physical sickness. Also excluded are damages received for
emotional distress if an injury has its origin in a physical injury or
physical sickness (regardless of whether the damages are received
by a lawsuit or an agreement). Punitive damages received are
included in gross income even if in connection with a physical injury
or sickness
◉ Is unemployment compensation included in gross income?.
Answer: Yes
◉ Is disability pay included in gross income?. Answer: No
◉ Are punitive damages included in gross income?. Answer: Yes
(unless you received a physical injury in connection with the
punitive damages)
,◉ Are benefits from a health and accident plan included in gross
income if paid by employer?. Answer: No (if you received a physical
injury in connection with the benefits)
◉ is compensation for lost wages included in gross income?.
Answer: No, as long as the income was given because of physical
injury or illness
◉ is compensation due to punitive damages included in gross
income?. Answer: No, as long as the income was given because of
physical injury or illness
◉ In December 2018, Jim and Tina, a married couple with $50,000
in gross income, cashed qualified Series EE U.S. Savings Bonds,
which they had purchased in January 2015. The proceeds were used
to help pay for their son's 2018 college tuition. They received gross
proceeds of $3,500, representing principal of $3,000 and interest of
$500. The qualified higher educational expenses they paid during
2018 totaled $2,100. Their modified adjusted gross income for 2018
was $80,000. How much of the $500 interest can Jim and Tina
exclude from income for 2018?. Answer: $300. Interest is excluded
as long as the gross amount received (principal and interest) do not
exceed qualified educational expenses. If they do exceed that
amount, the amount excluded is limited to the percentage.
2100/3500 = .6 *500 = 300. The exclusion is reduced when AGI
, exceeds a threshold of $79,550 (single) or $119,300 (MFJ).
completely phased out at $94,550 and $149,300
◉ What factors determine tax home?. Answer: 1. The taxpayer
performs his or her business in the area surrounding his/her main
home and uses that for lodging while in the area.
2. The taxpayer has living expenses at his or her main home that are
duplicated because business requires him/her to be away from the
main home.
3. The taxpayer has not abandoned the area in which both his/her
traditional place of lodging and man home; family members live at
his/her main home. She often uses this main home for lodging.
◉ Under what circumstance is a day NOT considered a day of
personal use of a dwelling unit for determining if it is used as a
home?. Answer: If the taxpayer rents the home at fair rental value to
any person (including relatives), such use by that person is not
considered personal use of the home
◉ When are meals deductible?. Answer: 50% of meals are
deductible if eaten while away from home on business or with a
client or business associate.
◉ Are entertainment expenses deductible?. Answer: No
STUDY GUIDE COMPLETE REPRESENTATION
PRACTICE AND IRS PROCEDURE QUESTIONS
◉ Resident Alien. Answer: If either the green card test or the
substantial presence test is met. Even if the taxpayer does not meet
either of these tests, (s)he may be able to choose to be treated as a
U.S. resident for part of the year.
◉ Green Card Test. Answer: A taxpayer is a resident for tax purposes
if (s)he was a lawful permanent resident (immigrant) of the United
States at any time during the year
◉ Substantial presence Test. Answer: A taxpayer is considered a U.S.
resident if she/he was physically present in the US for at least (1) 31
days during 2018 and 183 days during 2018, 2017, and 2016,
counting all days of physical presence in 2018 but only 1/3 of days
in 2017, and 1/6 of days in 2016
◉ Provisional Income threshholds for exclusion of SS Benefits from
Income. Answer: MFJ -- 32,000 to 44,000
All Others-- 25,000 to 34,000
MFSLT -- 0
,◉ What is excluded from gross income in the case of insurance
proceeds?. Answer: Disability pay (excluded)
Accident insurance proceeds. sub for lost income (excluded)
Damages for emotional distress (included if no physical injury)
Punitive damages (included)
Gross income does not include benefits specified that might be
received in the form of disability pay, health or accident insurance
proceeds (even if benefits are a substitute for lost income), workers'
compensation awards, or other damages for personal physical injury
or physical sickness. Also excluded are damages received for
emotional distress if an injury has its origin in a physical injury or
physical sickness (regardless of whether the damages are received
by a lawsuit or an agreement). Punitive damages received are
included in gross income even if in connection with a physical injury
or sickness
◉ Is unemployment compensation included in gross income?.
Answer: Yes
◉ Is disability pay included in gross income?. Answer: No
◉ Are punitive damages included in gross income?. Answer: Yes
(unless you received a physical injury in connection with the
punitive damages)
,◉ Are benefits from a health and accident plan included in gross
income if paid by employer?. Answer: No (if you received a physical
injury in connection with the benefits)
◉ is compensation for lost wages included in gross income?.
Answer: No, as long as the income was given because of physical
injury or illness
◉ is compensation due to punitive damages included in gross
income?. Answer: No, as long as the income was given because of
physical injury or illness
◉ In December 2018, Jim and Tina, a married couple with $50,000
in gross income, cashed qualified Series EE U.S. Savings Bonds,
which they had purchased in January 2015. The proceeds were used
to help pay for their son's 2018 college tuition. They received gross
proceeds of $3,500, representing principal of $3,000 and interest of
$500. The qualified higher educational expenses they paid during
2018 totaled $2,100. Their modified adjusted gross income for 2018
was $80,000. How much of the $500 interest can Jim and Tina
exclude from income for 2018?. Answer: $300. Interest is excluded
as long as the gross amount received (principal and interest) do not
exceed qualified educational expenses. If they do exceed that
amount, the amount excluded is limited to the percentage.
2100/3500 = .6 *500 = 300. The exclusion is reduced when AGI
, exceeds a threshold of $79,550 (single) or $119,300 (MFJ).
completely phased out at $94,550 and $149,300
◉ What factors determine tax home?. Answer: 1. The taxpayer
performs his or her business in the area surrounding his/her main
home and uses that for lodging while in the area.
2. The taxpayer has living expenses at his or her main home that are
duplicated because business requires him/her to be away from the
main home.
3. The taxpayer has not abandoned the area in which both his/her
traditional place of lodging and man home; family members live at
his/her main home. She often uses this main home for lodging.
◉ Under what circumstance is a day NOT considered a day of
personal use of a dwelling unit for determining if it is used as a
home?. Answer: If the taxpayer rents the home at fair rental value to
any person (including relatives), such use by that person is not
considered personal use of the home
◉ When are meals deductible?. Answer: 50% of meals are
deductible if eaten while away from home on business or with a
client or business associate.
◉ Are entertainment expenses deductible?. Answer: No
