Becoming a Registered Tax Return Preparer would be a desire of many people who have been preparing income tax returns for a short or for long time. Preparing income taxes as a profession is an exciting, satisfying, and rewarding activity. However, with the new IRS rules many would be tax return preparers will be confronting the decision of whether or not to continue preparing tax returns. The new requirements are challenging, especially the examination part. Maybe you are wondering, which tax regulations you will tested on in this exam?  In this article, I will present to you the list of recommended study materials the IRS included in the document titled "Specifications for Registered Tax Return Preparer Test", released in early September, 2011.

The focus of the exam is the Form 1040 series. Basically, everything that has to do with individual tax return preparation will be object of questions in the IRS competency examination. In addition, regulations about practice before the IRS (Circular 230) and procedures for IRS e-file providers (Publication 1345) are included as "must study" material.  

The practices and procedures plus the rules of ethics covered in Circular 230 weight approximately 20% of the total material you will be tested on, as part of your knowledge base, whereas individual tax returns preparation will cover the remaining 80% of your exam. As we are talking about an exam which will include a total of 120 multiple choice and true/false questions, you will have around 24 questions related to Circular 230 practices and procedures. 

• Publication 17, Your Federal Income Tax
• Form 1040, U.S. Individual Income Tax Return
• Form 1040 Instructions
• Circular 230, Regulations Governing Practice before the  Internal Revenue Service (rev. 8/2/11)
• Publication 334, Tax Guide for Small Business
• Publication 970, Tax Benefits for Education
• Publication 1345, Handbook for Authorized IRS e-file Providers
• Form 6251, Alternative Minimum Tax - Individuals
• Form 6251 Instructions 
• Form 8879, IRS e-File Signature Authorization
• Some reference materials will be available to candidates in  the test room for use while taking the test. Prometric will provide candidates with Publication 17, Form 1040 and Form 1040 instructions, as reference materials.

The IRS test will be available in the mid-Fall, 2011. The major topics that will be covered by the test were published by the IRS in early September/2011.

 
It takes time to prepare for any competency or certification exam and usually the preparation process is expensive. Having the right material, the right plan and the right attitude is crucial to pass any exam. It will spare you, as a candidate to the IRS exam, from going from failure to failure and spending a lot of money.

Which of the following taxpayers may use the cash method of accounting?

1. a tax shelter
2.  a qualified personal services corporation
3. a C corporation with annual gross receipts of $50,000,000
4. a manufacturer with annual gross receipts of $3,000,000.

The cash method cannot generally be used if inventories are necessary are necessary to clearly reflect income, and cannot generally be used by C corporations, partnerships that have a C corporation as a partner, tax shelters, and certain tax-exempts trusts.

Taxpayers allowed to use the cash method include:

•  a qualified personal service corporation,
• an entity (no tax shelter) if for every year it has average gross receipts of $5 million or less for any prior year 3 years period and provided it does not have inventory.
• small taxpayer with average annual gross receipts of $1 million or less for any prior 3 years as long as it is excepted from the requirements to account for inventories.

(Source: Wiley CPA Review - Regulation)

Tax Term:

From 1040 Exam Prep e-Books Series