Your FREE Enrolled Agent Flashcards 2026 – 250+ Cards

Enrolled Agent Flashcards

Enrolled agent

A federally authorized tax practitioner empowered by the U.S. Treasury with unlimited rights to represent any taxpayer before the IRS on any tax matter.

Special Enrollment Examination (SEE)

The 3-part IRS exam — Individuals, Businesses, and Representation — passed to become an enrolled agent.

Adjusted gross income (AGI)

Total income minus above-the-line adjustments (e.g., deductible IRA, student-loan interest, ½ of SE tax).

Above-the-line deduction

An adjustment subtracted from total income to reach AGI, available whether or not the taxpayer itemizes.

Standard deduction (2025, single)

$15,750 for single and married filing separately filers.

Standard deduction (2025, MFJ)

$31,500 for married filing jointly and qualifying surviving spouses.

Standard deduction (2025, HoH)

$23,625 for head of household filers.

Additional standard deduction (2025)

$1,600 each for age 65+ or blind; $2,000 if unmarried and not a surviving spouse.

Five filing statuses

Single, Married Filing Jointly, Married Filing Separately, Head of Household, Qualifying Surviving Spouse.

When is filing status determined?

On the last day of the tax year (December 31 for calendar-year taxpayers).

Head of household requirements

Be unmarried (or considered unmarried), pay more than half the cost of keeping up a home, and have a qualifying person live with you more than half the year.

Qualifying surviving spouse

A status for the two years after a spouse's death for a taxpayer with a dependent child; uses MFJ rates and the $31,500 standard deduction.

'Considered unmarried' for HoH

A still-married taxpayer who lived apart from the spouse the last 6 months of the year and kept up a home for a qualifying child may file head of household.

Qualifying child — five tests

Relationship, age, residency, support, and joint-return tests.

Qualifying relative tests

Not a qualifying child, relationship/member-of-household, gross-income, and support tests.

ITIN

Individual Taxpayer Identification Number — issued to taxpayers who must file but are not eligible for a Social Security number.

Tax deduction vs. tax credit

A deduction reduces taxable income (value depends on the bracket); a credit reduces tax dollar-for-dollar.

Refundable credit

A credit (e.g., EITC, Additional Child Tax Credit) that can produce a refund even when it exceeds tax owed.

Nonrefundable credit

A credit that can reduce tax only to zero; any excess is lost (some carry forward).

Child Tax Credit (2025)

Up to $2,200 per qualifying child under age 17; up to $1,700 refundable as the Additional Child Tax Credit.

Credit for Other Dependents

A $500 nonrefundable credit for dependents who don't qualify for the Child Tax Credit.

Child Tax Credit phaseout (2025)

Begins at modified AGI of $400,000 (MFJ) or $200,000 (all others), reduced $50 per $1,000 over.

Earned Income Tax Credit (EITC)

A refundable credit for low-to-moderate-income workers, larger with more qualifying children; a top preparer due-diligence area.

EITC maximum (2025)

$649 (0 children), $4,328 (1), $7,152 (2), $8,046 (3 or more).

EITC investment-income limit (2025)

$11,950 — exceed it and the EITC is disallowed.

American Opportunity Tax Credit (AOTC)

Up to $2,500 per student for the first 4 years of college; 40% refundable (up to $1,000).

Lifetime Learning Credit (LLC)

Up to $2,000 per return for any years of higher education or job-skill courses; entirely nonrefundable.

AOTC vs. LLC — can you claim both?

Not for the same student in the same year; choose one per student.

Education-credit phaseout (2025)

MAGI $80,000–$90,000 (single) and $160,000–$180,000 (MFJ) for both AOTC and LLC.

Itemized deductions (Schedule A)

Medical over 7.5% of AGI, state and local taxes (capped at $40,000 for 2025), mortgage interest, and charitable gifts.

SALT deduction cap

For 2025 (OBBBA) state and local taxes are capped at $40,000 ($20,000 if married filing separately) as an itemized deduction, phasing down for MAGI over $500,000 but never below $10,000; reverts to $10,000 after 2029.

Medical-expense floor

Only medical expenses exceeding 7.5%% of AGI are deductible on Schedule A.

Capital gain

Profit on the sale of a capital asset: amount realized minus basis.

Basis

A taxpayer's investment in property — usually cost plus improvements — used to figure gain or loss.

Long-term vs. short-term holding period

More than one year = long-term (preferential rates); one year or less = short-term (ordinary rates).

Long-term capital gains rates

0%%, 15%%, or 20%% depending on taxable income — generally lower than ordinary rates.

0% LTCG breakpoint (2025)

Taxable income up to $48,350 (single) or $96,700 (MFJ) is taxed at the 0% long-term rate.

Capital-loss ordinary offset

Net capital losses offset up to $3,000 of ordinary income per year ($1,500 MFS); the rest carries forward.

Section 121 home-sale exclusion

Excludes up to $250,000 ($500,000 MFJ) of gain on a main home meeting the 2-of-5-year ownership and use test.

Self-employment tax

15.3%% on net SE earnings (12.4%% Social Security up to the wage base + 2.9%% Medicare); half is deductible above the line.

Net Investment Income Tax (NIIT)

A 3.8%% tax on net investment income above modified-AGI thresholds for higher-income taxpayers.

Additional Medicare Tax

A 0.9% tax on wages and self-employment income above a threshold ($200,000 single / $250,000 MFJ).

Alternative Minimum Tax (AMT)

A parallel tax (26%%/28%%) that recaptures the benefit of certain deductions and preferences.

Kiddie tax

A child's unearned income above a threshold is taxed at the parent's marginal rate.

Early-distribution penalty

A 10%% additional tax generally applies to retirement distributions before age 59½, with exceptions.

Required minimum distribution (RMD)

The minimum a retirement account owner must withdraw each year beginning at the applicable RMD age.

Traditional vs. Roth IRA

Traditional IRA contributions may be deductible and distributions taxable; Roth contributions are after-tax and qualified distributions are tax-free.

Qualified Roth distribution

Tax-free if taken after age 59½ (or other trigger) and the 5-year holding period is met.

Form 1040

The U.S. individual income tax return.

Form 1040-X

The amended individual income tax return.

Alimony (post-2018 divorce)

Not deductible by the payer and not taxable to the recipient for agreements executed after 2018.

Alimony (pre-2019 divorce)

Deductible by the payer and taxable to the recipient for agreements executed before 2019.

Community property

In community-property states, income earned during marriage is split 50/50 between spouses — important for MFS returns.

Innocent spouse relief

Relief from joint tax liability for an understatement caused by the other spouse that the requesting spouse didn't know about.

Injured spouse allocation

Form 8379 — protects one spouse's refund share from being applied to the other spouse's separate debt.

Gift tax annual exclusion (2025)

$19,000 per donee; gifts above it are reported on Form 709 and use the lifetime exemption.

Gift-splitting

Married donors can elect to treat gifts as made half by each spouse, doubling the annual exclusion.

Form 709

The United States gift (and generation-skipping transfer) tax return.

Form 706

The estate tax return, filed for estates above the lifetime exemption.

FBAR (FinCEN Form 114)

Report of foreign bank and financial accounts, filed with FinCEN — separate from the IRS Form 8938.

Form 8938

Statement of specified foreign financial assets, filed with the income tax return (different thresholds than the FBAR).

Premium Tax Credit

A refundable credit that helps pay marketplace health-insurance premiums, reconciled on Form 8962.

Cancellation of debt income

Forgiven debt is generally taxable income unless an exclusion (e.g., insolvency, bankruptcy) applies.

Standard mileage vs. actual expense

Two methods to deduct vehicle costs; the standard mileage rate is set annually per business mile.

Estimated tax payments

Quarterly payments required when withholding won't cover the tax, to avoid an underpayment penalty.

Dependent's standard deduction (2025)

The greater of $1,350 or earned income plus $450 (not exceeding the regular standard deduction).

Form 8867

The Paid Preparer's Due Diligence Checklist required for EITC, CTC/ODC, AOTC, and head-of-household claims.

Sole proprietorship

An unincorporated one-owner business reported on Schedule C; income is subject to income and self-employment tax.

Schedule C

The form a sole proprietor uses to report business profit or loss on the individual return.

Partnership

A pass-through entity filing Form 1065 that reports each partner's share on Schedule K-1.

Form 1065

The U.S. return of partnership income — informational; the partnership itself pays no income tax.

S corporation

A pass-through corporation (Form 1120-S + K-1) limited to 100 eligible shareholders and one class of stock.

Form 1120-S

The income tax return for an S corporation; income flows through to shareholders on Schedule K-1.

C corporation

A corporation taxed separately at a flat 21%% rate; its dividends are taxed again to shareholders (double taxation).

Form 1120

The U.S. corporation income tax return for a C corporation.

C corporation tax rate

A flat 21%% federal corporate income tax rate.

Double taxation

C corporation profits are taxed at the entity level (21%%), then again as dividends to shareholders.

Pass-through entity

A business (sole prop, partnership, S corp) whose income is taxed to the owners rather than the entity.

Schedule K-1

Reports each owner's share of a pass-through entity's income, deductions, and credits.

Form 2553

The election by which an eligible corporation becomes an S corporation.

Form 8832

The entity classification election (check-the-box) by which an eligible entity chooses its tax treatment.

S corporation eligibility

No more than 100 eligible shareholders (generally U.S. individuals), one class of stock, and a timely Form 2553 election.

Partner basis

A partner's investment in the partnership; it limits deductible losses and includes a share of partnership liabilities.

Shareholder basis (S corp)

Limits deductible losses; unlike a partner, an S-corp shareholder's basis does not include entity-level debt (only direct loans).

Distribution in excess of basis

A distribution greater than the owner's basis is taxable as capital gain.

Guaranteed payment

A fixed payment to a partner for services or capital — deductible by the partnership and generally subject to self-employment tax.

Section 351

Allows tax-free transfer of property to a corporation in exchange for stock when the transferors control 80%% after.

Earnings and profits (E&P)

A corporate tax measure that determines how much of a distribution is a taxable dividend.

Dividends-received deduction (DRD)

A deduction that lets a C corporation exclude part of dividends received from other corporations to limit triple taxation.

Accumulated earnings tax

A penalty tax on a C corporation that retains earnings beyond reasonable business needs to avoid shareholder tax.

Cost of goods sold (COGS)

Beginning inventory plus purchases minus ending inventory; subtracted from gross receipts to get gross profit.

UNICAP (Section 263A)

Uniform capitalization rules requiring certain direct and indirect costs to be capitalized into inventory.

Depreciation

The deduction that spreads the cost of business property over its useful life.

MACRS

The Modified Accelerated Cost Recovery System — the standard depreciation method with set class lives.

Section 179 expensing

An election to deduct the cost of qualifying business property immediately, up to an annual cap; limited to business income (can't create a loss).

Bonus depreciation

An additional first-year deduction of a percentage of qualifying property's cost; unlike §179, it can create a loss.

§179 vs. bonus order

Apply Section 179 first (up to business income), then bonus depreciation on the remaining basis.

Qualified business income (QBI) deduction

Section 199A deduction of up to 20%% of qualified business income for eligible pass-through owners.

QBI thresholds (2025)

Limitations phase in above taxable income of $197,300 (single) and $394,600 (MFJ).

Specified service trade or business (SSTB)

Fields like health, law, accounting, and consulting; the QBI deduction phases out and is lost above the upper threshold.

Net operating loss (NOL)

A loss exceeding income; carried forward to offset up to 80%% of future taxable income.

Form 3115

The application to change an accounting method.

Cash vs. accrual method

Cash recognizes income when received and expenses when paid; accrual recognizes when earned/incurred.

Schedule M-1

Reconciles book income to taxable income on a business return — a frequent exam topic.

Home-office deduction

Allowed for space used regularly and exclusively as a principal place of business; simplified or actual-expense method.

Worker classification

Employee vs. independent contractor, judged on behavioral control, financial control, and the relationship.

Form 1099-NEC

Reports nonemployee compensation of $600 or more to a contractor.

Form 8300

Reports cash payments over $10,000 received in a trade or business.

Estate or trust return

Form 1041 — reports the income of an estate or trust.

Distributable net income (DNI)

Limits and characterizes the income an estate or trust deducts for distributions and passes to beneficiaries on K-1.

Tax-exempt organization

Applies on Form 1023/1024 and files Form 990 annually; may owe tax on unrelated business income.

Form 990

The annual information return filed by most tax-exempt organizations.

Unrelated business income tax (UBTI)

Tax on income an exempt organization earns from a trade or business unrelated to its exempt purpose (Form 990-T).

SEP IRA

A simplified employee pension plan letting employers make tax-deductible retirement contributions for employees.

SIMPLE IRA

A retirement plan for small employers with employee deferrals and required employer contributions.

Prohibited transaction

An improper dealing between a retirement plan and a disqualified person that triggers excise tax.

Schedule F

The form farmers use to report farm income and expenses.

Passive activity loss rules

Losses from passive activities (e.g., most rentals) are deductible only against passive income, with limited exceptions.

$25,000 rental loss allowance

Active participants can deduct up to $25,000 of rental real-estate losses against other income, phased out as MAGI rises above $100,000.

Real estate professional

A taxpayer meeting material-participation and hours tests whose rental activities are not automatically passive.

Like-kind exchange (Section 1031)

Defers gain on the exchange of real property held for business or investment for like-kind real property.

Depreciation recapture

Gain attributable to prior depreciation is taxed at ordinary or special rates rather than capital-gain rates.

Estimated tax for corporations

C corporations generally pay estimated tax in quarterly installments to avoid an underpayment penalty.

EIN

Employer Identification Number — the federal tax ID for a business entity.

Reasonable compensation (S corp)

S-corp owner-employees must be paid reasonable wages before taking distributions, to prevent avoiding payroll tax.

Built-in gains tax

A corporate-level tax on a former C corporation's appreciated assets sold within a recognition period after the S election.

Self-employment tax base

Net earnings from self-employment (generally 92.35%% of net profit) are subject to SE tax.

Circular 230

Treasury Department regulations (31 CFR Part 10) governing practice before the IRS — duties, standards, and sanctions.

Who may practice before the IRS

Attorneys, CPAs, enrolled agents, enrolled retirement plan agents, enrolled actuaries, and (limited) tax return preparers.

Unlimited representation rights

Enrolled agents, CPAs, and attorneys can represent any taxpayer on any matter before any IRS office.

Office of Professional Responsibility (OPR)

The IRS office with exclusive authority to enforce Circular 230 and discipline practitioners.

Circular 230 sanctions

Censure (public reprimand), suspension (1–59 months), disbarment (5+ years), and monetary penalty (up to 100%% of gross income from the conduct).

Censure

A public reprimand under Circular 230; the practitioner may continue to practice.

Suspension

A Circular 230 sanction barring practice before the IRS for 1 to 59 months.

Disbarment

A Circular 230 sanction revoking practice rights; reinstatement may be petitioned only after at least 5 years.

§10.21 duty

A practitioner must promptly advise a client of any known error, omission, or noncompliance.

§10.22 due diligence

A practitioner must exercise due diligence as to the accuracy of returns and representations to the IRS.

§10.27 fees

A practitioner may not charge an unconscionable fee; contingent fees are restricted to limited situations.

§10.28 client records

A practitioner must promptly return a client's records on request — even in a fee dispute.

§10.29 conflicts of interest

A practitioner must not represent conflicting interests absent informed written consent from each client.

Contingent fee (when allowed)

Generally only for an IRS examination/challenge of an original return, a refund claim related to penalties/interest, or judicial proceedings.

PTIN

Preparer Tax Identification Number — required for every paid preparer (including EAs) and renewed annually.

EA continuing education

72 hours every 3-year cycle (including 6 hours of ethics), with a minimum of 16 hours per year (2 ethics).

EA renewal

Enrolled agents renew enrollment every 3 years on Form 8554, staggered by the last digit of the SSN.

Form 23

The application for enrollment to become an enrolled agent, filed within 1 year of passing the last SEE part.

Power of attorney (Form 2848)

Authorizes a representative to advocate, sign certain documents, and receive confidential information before the IRS.

Tax Information Authorization (Form 8821)

Lets a third party receive and inspect a taxpayer's information but grants no authority to represent.

Form 2848 vs. Form 8821

2848 lets you represent and advocate; 8821 only lets you receive information.

Centralized Authorization File (CAF)

The IRS database recording authorizations; it assigns each representative a CAF number.

Authority hierarchy

Internal Revenue Code → Treasury regulations → revenue rulings/case law → private letter rulings and the IRM.

Private letter ruling (PLR)

A written IRS determination on a specific taxpayer's facts; binding only on that taxpayer.

Statute of limitations — assessment

Generally 3 years from filing (6 years if income is understated by more than 25%%; unlimited for fraud).

Statute of limitations — collection

Generally 10 years from assessment to collect the tax.

Examination types

Correspondence (by mail), office (in an IRS office), and field (at the taxpayer's location) audits.

Revenue Agent Report (RAR)

The report proposing audit adjustments, accompanying a 30-day letter.

30-day letter

Proposes adjustments and offers the taxpayer the right to appeal within the IRS Independent Office of Appeals.

90-day letter (Notice of Deficiency)

The statutory notice giving 90 days to petition the U.S. Tax Court without first paying the tax.

IRS Independent Office of Appeals

Settles disputes based on the hazards of litigation — the last administrative chance to resolve a case.

CP-2000 notice

An underreporter notice proposing changes when amounts on a return don't match third-party information returns.

§7525 privilege

A limited confidentiality privilege for tax advice between a taxpayer and a federally authorized practitioner (not for criminal or tax-shelter matters).

Burden of proof

Generally on the taxpayer, but it can shift to the IRS if the taxpayer keeps records and cooperates.

Tax lien

A legal claim against a taxpayer's property for unpaid tax; the Notice of Federal Tax Lien alerts creditors.

Tax levy

The actual seizure of a taxpayer's property or wages to satisfy a tax debt.

Collection Due Process (CDP) hearing

Requested on Form 12153 after a lien or levy notice to dispute the collection action before Appeals.

Installment agreement

A payment plan letting a taxpayer pay a tax debt over time in monthly amounts.

Offer in compromise (OIC)

An agreement to settle a tax debt for less than the full amount when full payment is impossible or liability is doubtful.

OIC grounds

Doubt as to collectibility, doubt as to liability, or effective tax administration.

Currently not collectible (CNC)

A status that pauses collection when the taxpayer cannot pay basic living expenses and the debt.

Collection Financial Standards

IRS allowable-living-expense standards used to evaluate ability to pay for installment agreements and offers.

Trust fund recovery penalty (TFRP)

A 100%% penalty on responsible persons who willfully fail to pay over withheld employment taxes.

Audit reconsideration

A process to reevaluate an audit assessment when the taxpayer has new information or didn't appear.

Form 843

A claim for refund or request for abatement of certain taxes, penalties, interest, or fees.

Penalty abatement

Removal of a penalty for reasonable cause or under first-time-abatement relief.

Taxpayer Advocate Service (TAS)

An independent IRS organization that helps taxpayers facing hardship or unresolved problems.

Tax avoidance

The legal minimization of tax using the code's deductions, credits, and structuring.

Tax evasion

The illegal, willful attempt to defeat tax by concealing income or falsifying records — a federal crime.

Freedom of Information Act (FOIA)

Lets a taxpayer request certain IRS records, such as their administrative or collection file.

§6695 preparer penalties

Penalties for preparer failures, including the EITC/CTC/AOTC/HoH due-diligence penalty (Form 8867).

§6694 understatement penalty

A penalty on a preparer for an understatement due to an unreasonable position or willful/reckless conduct.

EFIN

Electronic Filing Identification Number — issued to an authorized e-file provider (ERO).

ERO

Electronic Return Originator — the authorized provider who originates the electronic submission of returns.

Form 8879

The taxpayer's e-file signature authorization that the ERO retains.

Form 8948

Explains why a return that was required to be e-filed was instead filed on paper.

E-file mandate

Preparers who file more than a small number of covered returns must generally e-file them.

Identity Protection PIN (IP PIN)

A six-digit number that prevents someone else from filing a return with a taxpayer's SSN.

Record retention

Preparers must keep copies of returns or a client list, and meet data-security safeguards (e.g., a written security plan).

Reliance on software

A preparer must use due care and cannot blindly rely on tax software for positions that lack a reasonable basis.

Frivolous return penalty

A penalty for filing a return taking a frivolous position or intended to delay or impede tax administration.

Practice before the IRS

Communicating with the IRS on a taxpayer's behalf — preparing and filing documents, corresponding, and representing at conferences or hearings.

Best practices (§10.33)

Aspirational standards: clear advice, acting fairly and with integrity, and clearly communicating terms of engagement.

Wages and salaries

Compensation reported on Form W-2; fully includible in gross income.

Taxable interest

Interest from banks, bonds, and most sources is taxable; reported on Schedule B if over a threshold.

Tax-exempt interest

Municipal-bond interest is generally exempt from federal income tax but still reported.

Qualified dividends

Dividends taxed at the preferential long-term capital-gains rates if holding-period rules are met.

Ordinary dividends

Dividends taxed at ordinary income rates.

Social Security benefits

Up to 85%% of benefits may be taxable depending on the taxpayer's combined income.

Unemployment compensation

Fully taxable as ordinary income.

Gambling winnings/losses

Winnings are fully taxable; losses are deductible only if itemizing and only up to winnings.

Health Savings Account (HSA)

Lets eligible taxpayers with a high-deductible plan make pre-tax contributions and take tax-free qualified medical withdrawals.

Saver's Credit

A nonrefundable credit for lower-income taxpayers who contribute to a retirement account.

Child and Dependent Care Credit

A credit for work-related care expenses for a qualifying child under 13 or a disabled dependent.

Adoption credit

A nonrefundable credit for qualified adoption expenses, subject to a dollar limit and phaseout.

Standard deduction vs. itemizing

A taxpayer takes the greater of the standard deduction or total itemized deductions.

Net investment income

Interest, dividends, capital gains, rents, and royalties — the base for the 3.8%% NIIT.

Form 8606

Reports nondeductible IRA contributions and basis to keep that portion from being taxed again on distribution.

Qualified charitable distribution (QCD)

An IRA owner 70½ or older can exclude from income amounts transferred directly to charity, up to an annual limit.

Student loan interest deduction

An above-the-line deduction of up to $2,500 of student-loan interest, subject to a MAGI phaseout.

Educator expense deduction

An above-the-line deduction for eligible K-12 educators' classroom expenses, up to an annual cap.

Wash sale rule

Disallows a loss on a security sold and repurchased (or substantially identical) within 30 days before or after.

Estimated-tax safe harbor

Avoid the underpayment penalty by paying 90%% of the current year or 100%% (110%% for higher income) of the prior year's tax.

Standard deduction not allowed (MFS)

If one spouse itemizes on an MFS return, the other spouse must also itemize (can't take the standard deduction).

Premium tax credit reconciliation

Advance payments of the PTC are reconciled on Form 8962, which can increase or decrease the refund.

Capital asset

Most property held for personal use or investment; key exceptions include inventory and business receivables.

Form 1065 Schedule K vs. K-1

Schedule K summarizes partnership items; each K-1 reports one partner's distributive share.

Partnership liquidation

Distributions in liquidation generally are tax-free to the extent of basis, with gain only above basis.

S corporation termination

An S election ends by revocation, ceasing to qualify, or excess passive income for 3 years with E&P.

Corporate liquidation

A liquidating corporation generally recognizes gain/loss as if it sold its assets at fair market value.

Section 1245 property

Depreciable personal property; gain up to prior depreciation is recaptured as ordinary income.

Section 1250 property

Depreciable real property; unrecaptured §1250 gain is taxed at a maximum 25%% rate.

Section 1231 property

Depreciable business property held over a year; net gains are capital, net losses are ordinary.

Start-up costs

Up to $5,000 deductible in year one (phased out over $50,000), the rest amortized over 180 months.

Organizational costs

Up to $5,000 deductible in year one, the remainder amortized over 180 months.

Estimated tax (pass-through owners)

Owners pay estimated tax on their share of pass-through income via their individual returns.

Form 940

The employer's annual Federal Unemployment Tax (FUTA) return.

Form 941

The employer's quarterly return reporting withheld income tax and Social Security/Medicare.

Accountable plan

An employee-reimbursement arrangement that, if business-connected and substantiated, is not taxable wages.

Inventory valuation

Methods include FIFO, LIFO, and specific identification; the method affects COGS and taxable income.

Hobby loss rules

An activity not engaged in for profit can't deduct losses; the profit-presumption test helps distinguish a business.

At-risk rules

Limit deductible losses to the amount the taxpayer has economically at risk in the activity.

Charitable contributions (C corp)

Deductible up to 10%% of taxable income, with a 5-year carryover of the excess.

Form 1128

The application to adopt, change, or retain a tax year.

Fiscal year vs. calendar year

A business may use a fiscal year (ending other than December 31) if it qualifies and elects properly.

Distributions vs. dividends (S corp)

S-corp distributions are generally tax-free return of basis; C-corp distributions are dividends to the extent of E&P.

Material participation

Regular, continuous, and substantial involvement that makes an activity nonpassive (seven tests).

Bad debt deduction

Business bad debts are deductible as ordinary losses; nonbusiness bad debts are short-term capital losses.

Form 4562

Reports depreciation and amortization, including Section 179 and bonus depreciation.

Self-employed health insurance

A self-employed person may deduct health-insurance premiums above the line, limited to business income.

Enrolled agent — how to earn it

Pass all 3 SEE parts within 3 years, or qualify through former IRS technical experience, then apply on Form 23.

Suitability check

A tax-compliance and background review the IRS conducts before granting enrollment.

Form 8554

The application for renewal of enrollment to practice as an enrolled agent.

PTIN renewal

Every paid preparer must renew the PTIN each year, generally between mid-October and December 31.

Sanctionable conduct (§10.51)

Incompetence and disreputable conduct — e.g., giving false information, conviction of certain crimes, or willful tax noncompliance.

Willful violation (§10.52)

A practitioner can be sanctioned for willfully violating Circular 230 or recklessly/grossly incompetently violating §10.34 standards.

Reasonable basis

A return-position standard — significantly higher than not frivolous but lower than substantial authority.

Substantial authority

A position standard met when authorities supporting it are substantial relative to those against it.

Notice of Federal Tax Lien

A public filing that puts creditors on notice of the IRS's claim against a taxpayer's property.

Collection Appeals Program (CAP)

A faster appeal of certain collection actions, but the decision can't go to Tax Court.

Equivalent hearing

A CDP-like hearing requested after the 30-day CDP deadline, without the right to petition Tax Court.

Doubt as to liability

An OIC ground used when there is a genuine dispute over whether the assessed tax is correct.

Doubt as to collectibility

An OIC ground used when the taxpayer's assets and income are less than the full liability.

Reasonable collection potential (RCP)

The IRS's measure of what it could collect — net asset equity plus future income — used to evaluate an OIC.

First-time abatement (FTA)

Penalty relief for a taxpayer with a clean compliance history for the prior three years.

Accuracy-related penalty

A 20%% penalty for negligence or a substantial understatement of income tax.

Failure-to-file penalty

5%% per month (up to 25%%) of unpaid tax for filing late.

Failure-to-pay penalty

0.5%% per month (up to 25%%) of unpaid tax for paying late.

Fraud penalty

A civil penalty of 75%% of the underpayment attributable to fraud.

Innocent-spouse relief (Form 8857)

The form used to request relief from joint and several liability.

Power of attorney scope

Form 2848 can limit the representative to specific tax matters, forms, and years.

CAF number

The unique identifier the IRS assigns a representative to track their authorizations.

Conference and Practice Requirements

Rules in Circular 230 and the IRM governing how a representative interacts with the IRS.

Practitioner privilege limits

The §7525 privilege does not apply in criminal cases or to tax-shelter promotion.

Frivolous-position list

The IRS publishes positions deemed frivolous; taking one can trigger a $5,000 penalty.

Whistleblower / referrals

Practitioners must not knowingly assist evasion and must withdraw from improper engagements.