Enrolled Agent (EA) Part 1 — Individuals: Tax Computation, AMT, and Specialized Returns Syllabus

Part 1 — Individuals: Tax Computation, AMT, and Specialized Returns syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Part 1 — Individuals: Tax Computation, AMT, and Specialized Returns in Enrolled Agent (EA), not a summary of it.

1. 1

   Tax Computation and Liability

   3 topics

   • Tax computation methods
     • Tax tables and tax rate schedules
     • Capital gains and qualified dividend rates
     • Self-employment tax computation
   • Additional taxes on individuals
     • Net investment income tax (3.8%)
     • Additional Medicare tax (0.9%)
     • Kiddie tax on children's unearned income
   • Alternative Minimum Tax
     • AMT preference and adjustment items
     • AMT exemption and phaseout thresholds
2. 2

   Estimated Taxes, Withholding, and Penalties

   3 topics

   • Estimated taxes and withholding
     • Safe harbor rules and Form 1040-ES
     • Underpayment penalty (Form 2210)
   • Withholding mechanics
     • Form W-4 and withholding adjustments
     • Backup withholding situations
   • Individual penalties and interest
     • Failure-to-file and failure-to-pay penalties
     • Accuracy-related penalties
3. 3

   Specialized Individual Returns

   3 topics

   • Foreign and expatriate considerations
     • Foreign earned income exclusion (Form 2555)
     • Resident vs. nonresident alien taxation
     • Reporting foreign accounts (FBAR and Form 8938)
   • Estate and gift tax basics for individuals
     • Annual gift exclusion and lifetime exemption
     • Basis of inherited and gifted property
   • Decedent and special-status taxpayers
     • Final return of a decedent
     • Members of the military and clergy

Part 1 — Individuals: Tax Computation, AMT, and Specialized Returns flashcards for Enrolled Agent (EA)

18 of 51 cards from the Part 1 — Individuals: Tax Computation, AMT, and Specialized Returns deck — real questions with worked answers.

1. What is the regular individual income tax computed using, and what two main methods exist for finding the tax on taxable income?

   Regular tax is computed on taxable income using either (1) the IRS Tax Tables (required when taxable income is under $100,000) or (2) the Tax Rate Schedules / Tax Computation Worksheet (required at $100,000 or more).

2. What are the seven ordinary individual marginal tax brackets under current law?

   10%, 12%, 22%, 24%, 32%, 35%, and 37%.

3. What preferential tax rates apply to net long-term capital gains and qualified dividends, and at what income levels?

   0%, 15%, or 20% depending on taxable income; 0% for lower-income taxpayers, 15% in the middle range, and 20% for the highest earners. Computed on the Qualified Dividends and Capital Gain Tax Worksheet.

4. What is the 'kiddie tax' and to whom does it apply?

   The kiddie tax taxes a child's net unearned income above a threshold (e.g., $2,600 for 2024) at the parents' marginal tax rate. It applies to children under 18, or under 19 (or under 24 if a full-time student) who don't provide over half their own support, with at least one living parent.

5. How is the maximum 28% rate gain (collectibles and certain section 1202 gain) taxed?

   Net collectibles gain and taxable section 1202 small business stock gain are taxed at a maximum rate of 28% (the lower of 28% or the taxpayer's ordinary rate).

6. What is unrecaptured section 1250 gain and at what rate is it taxed?

   It is the portion of gain on depreciable real property attributable to prior straight-line depreciation; it is taxed at a maximum rate of 25%.

7. What is the Net Investment Income Tax (NIIT), its rate, and threshold?

   A 3.8% tax on the lesser of net investment income or MAGI over the threshold ($250,000 MFJ, $125,000 MFS, $200,000 single/HOH). Reported on Form 8960.

8. What is the Additional Medicare Tax, its rate, and thresholds?

   A 0.9% tax on wages and self-employment income above $250,000 MFJ, $125,000 MFS, $200,000 others. Reported on Form 8959; employers must withhold the extra 0.9% on wages over $200,000.

9. What is the additional tax on early distributions from retirement plans?

   A 10% additional tax (penalty) on the taxable portion of distributions taken before age 59½, unless an exception applies. Reported on Form 5329.

10. Name four common exceptions to the 10% early distribution penalty.

    Death, total/permanent disability, qualified higher-education expenses (IRAs), first-time home purchase (up to $10,000 from IRA), substantially equal periodic payments (72(t)), unreimbursed medical expenses over the AGI threshold, and certain birth/adoption distributions.

11. What is the excise tax for failing to take a required minimum distribution (RMD)?

    An excise tax of 25% of the shortfall (reduced to 10% if corrected timely within the correction window). Formerly 50% before SECURE 2.0.

12. What is the Alternative Minimum Tax (AMT) and why does it exist?

    A parallel tax system ensuring taxpayers with substantial economic income pay at least a minimum amount of tax despite deductions/preferences. The taxpayer pays the greater of regular tax or tentative minimum tax.

13. What are the two AMT tax rates and the bracket breakpoint?

    26% on AMT income up to the breakpoint and 28% on AMTI above it (the breakpoint is indexed annually, e.g., about $232,600 for 2024). Reported on Form 6251.

14. How is Alternative Minimum Taxable Income (AMTI) computed?

    Start with regular taxable income, add back tax preference items and make AMT adjustments (e.g., add back state/local taxes, certain depreciation differences, ISO bargain element), then subtract the AMT exemption.

15. How does the AMT exemption phase out?

    The exemption is reduced by 25 cents for each $1 of AMTI above the phaseout threshold, fully eliminated at higher income levels (thresholds indexed annually).

16. Name three common AMT adjustments or preference items for individuals.

    Add-back of state and local taxes (no itemized deduction for them under AMT), the bargain element on incentive stock option exercises, accelerated vs. straight-line depreciation differences, and certain private activity bond interest (a preference item).

17. What is the AMT credit (minimum tax credit) and how does it work?

    AMT paid due to timing (deferral) items generates a minimum tax credit (Form 8801) that can be carried forward to offset regular tax in future years when regular tax exceeds tentative minimum tax. AMT from exclusion items does not generate the credit.

18. Who is generally required to pay estimated taxes?

    Individuals who expect to owe at least $1,000 in tax after withholding and refundable credits, and whose withholding/credits are less than the required annual payment (a safe-harbor amount).

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