IRS EA EXAM PART 1 COMPLETE QUESTIONS AND CORRECT
DETAILED ANSWERS
Updated Questions and Answers 100% Verified Exam Prep
,Which IRS publication is the Tax Guide for U.S. Citizens and Publication 54
Resident Aliens Abroad?
Which IRS publication covers Recordkeeping for Individuals? Publication 552
Which IRS publication is the Armed Forces' Tax Guide? Publication 3
What is Form 1040-SR? U.S. Income Tax Return for Seniors; an alternative to Form 1040 for senior taxpayers
State the flow of the Form 1040 tax return from gross income Gross income; less adjustments = AGI; less deductions = taxable income; apply tax
to the final balance. tables/schedules = income tax; less tax credits; plus other taxes = total tax; less
payments/refundable credits = amount due or overpayment (refund)
What is the best place to start when preparing this year's The prior year tax return; shows basic taxpayer info, what forms to expect (W-2s, 1099s,
return, and what carryover items does it reveal? K-1s), and carryovers such as net operating losses, capital losses, and depreciation
An EA discovers an error on a client's prior year return. What Must tell the client and explain the consequences; NOT required to fix it, but may amend
must the EA do, and what is the EA NOT required to do? with Form 1040-X if the client wants
What level of scrutiny must an EA apply to client information Due diligence to verify the information, but the EA is not required to audit it
such as income, expenses, credits, and basis of assets?
What documents support the cost/basis of assets? Closing statement (real estate), bank/brokerage statements, forms issued to the taxpayer
(e.g. 1099, K-1, 3922), receipts, cancelled checks, and appraisals
Who is required to file Form 1040? A U.S. citizen or resident of the United States or Puerto Rico who meets the filing
requirements (income or other); nonresidents may need to file Form 1040-NR
Define gross income for filing-requirement purposes. All income received in the form of money, goods, property and services that isn't exempt
from tax; includes foreign-source income, non-excluded gain on sale of home, the
taxable portion of Social Security, business gross income (not losses), and capital gains
(not losses)
What counts as earned income? Salaries, wages, tips, professional fees, taxable scholarships and grants, and income from
a business the taxpayer owns
,What counts as unearned income? Taxable interest, dividends, capital gains, unemployment compensation, taxable Social
Security benefits, pensions, annuities, and distributions of unearned income from trusts
Scenario: Joey, 21, Single, not claimable as a dependent, No; his total income of $15,500 is below the $15,750 minimum required to file
earned $12,000 in wages plus $2,500 dividends and $1,000
interest in 2025. Must he file?
Scenario: Monica, 21, Single, not claimable as a dependent, Yes; her self-employment earnings are $400 or more, which triggers a filing requirement
earned $12,000 in her grass cutting business plus $2,500 regardless of the $15,750 threshold
dividends and $1,000 interest in 2025. Must she file?
When is the 2025 Form 1040 due, and what is the general due- April 15, 2026; the 15th day of the fourth month following the end of the tax year, moved
date rule? to the next business day if it falls on a weekend or holiday
Which form gives an automatic 6-month extension to file, and Form 4868; extends filing to October 15, 2026 (it is NOT an extension to pay - estimate
to what date for 2025 returns? and pay the amount due with the 4868 or face interest and penalties)
Who qualifies for the automatic 2-month "outside the U.S." A U.S. citizen or resident living outside the U.S./Puerto Rico whose main place of business
filing extension, and to what date? or post of duty is outside the U.S./PR, or who is in the military outside the U.S./PR;
extends to June 15, 2026, but is not an extension to pay
A taxpayer abroad already has the automatic June 15, 2026 Yes; file Form 4868 for an additional 4 months, to October 15, 2026
extension. Can they extend further?
What relief applies in a presidentially declared disaster area? The IRS grants an extension of time to file AND pay (IRS announces the date) for
individual and business taxpayers who live in the disaster area, whose tax records are in
the area, and for relief workers
Who qualifies for the combat zone deadline extension besides Civilian support personnel, Red Cross personnel, and certain correspondents serving in
military personnel? a combat zone designated by the President; it extends time to file AND pay
How is the combat zone extension period computed? 180 days from the later of the last day in the combat zone or the last day of a qualifying
hospital stay from injury in the CZ, PLUS the number of days before April 15 that the
taxpayer entered the CZ in the year the return is due (up to 3 1/2 additional months)
Scenario: Nick entered a designated combat zone January 31, Monday, January 11, 2027; 285 days (180 + 105 days for Jan 1-Apr 15, 2026) after March 31,
2025 and served without injury through March 31, 2026. When 2026 is Sunday January 10, 2027, so it rolls to the next business day
is his 2025 return due?
, What is the failure-to-file penalty rate and cap? 5% of the balance due per month or part of a month, up to a maximum of 25% of the
balance due
What is the failure-to-file penalty if the failure is due to fraud? 15% of the balance due per month or part of a month, up to 75% of the balance due
What is the minimum failure-to-file penalty when a return is The smaller of $525 or 100% of the unpaid tax
more than 60 days late (2025 returns due in 2026)?
If a return is extended and later filed late, when do failure-to- Penalties run from the ORIGINAL due date; there is no failure-to-file penalty if there is no
file penalties start? When is there no penalty? balance due
What is the failure-to-pay penalty rate and cap? 1/2 of 1% (0.5%) of the balance due per month or part of a month, up to 25% of the
balance due
How can an extended filer avoid the failure-to-pay penalty? Pay at least 90% of the balance due by the original due date (with the extension) and pay
the remaining balance when filing
How do the failure-to-file and failure-to-pay penalties interact The failure-to-file penalty is reduced by the failure-to-pay penalty, for a combined 5%
when both apply? per month; the over-60-days rule (smaller of $525 or 100% of tax due) still applies
Scenario: A taxpayer owes $2,000, files 3 months late with no A combined 5% per month (FTF reduced by FTP), so 15% of the balance due over the 3
extension, and pays nothing until filing. What combined months, plus interest
FTF/FTP penalty rate applies each month?
How is IRS interest on unpaid tax determined, and when is it Based on the federal short-term rate, compounded daily and updated quarterly; charged
charged? from the return due date even if an extension was granted, and charged on penalties too;
it can be forgiven if due to IRS error or delay
What are the consequences of knowingly filing or helping to It is a felony punishable by a maximum fine of $100,000 and/or up to 3 years in prison
file a false return (perjury/fraud)?
When is a dependent NOT required to have an SSN/TIN on Only if the dependent was born and died in 2025; otherwise dependents of all ages need
the return? a taxpayer identification number
Who gets an ITIN, how is it obtained, and what is it for? A nonresident or resident alien (including children/dependents) not eligible for an SSN;
file Form W-7 with the IRS; it is for tax purposes only
DETAILED ANSWERS
Updated Questions and Answers 100% Verified Exam Prep
,Which IRS publication is the Tax Guide for U.S. Citizens and Publication 54
Resident Aliens Abroad?
Which IRS publication covers Recordkeeping for Individuals? Publication 552
Which IRS publication is the Armed Forces' Tax Guide? Publication 3
What is Form 1040-SR? U.S. Income Tax Return for Seniors; an alternative to Form 1040 for senior taxpayers
State the flow of the Form 1040 tax return from gross income Gross income; less adjustments = AGI; less deductions = taxable income; apply tax
to the final balance. tables/schedules = income tax; less tax credits; plus other taxes = total tax; less
payments/refundable credits = amount due or overpayment (refund)
What is the best place to start when preparing this year's The prior year tax return; shows basic taxpayer info, what forms to expect (W-2s, 1099s,
return, and what carryover items does it reveal? K-1s), and carryovers such as net operating losses, capital losses, and depreciation
An EA discovers an error on a client's prior year return. What Must tell the client and explain the consequences; NOT required to fix it, but may amend
must the EA do, and what is the EA NOT required to do? with Form 1040-X if the client wants
What level of scrutiny must an EA apply to client information Due diligence to verify the information, but the EA is not required to audit it
such as income, expenses, credits, and basis of assets?
What documents support the cost/basis of assets? Closing statement (real estate), bank/brokerage statements, forms issued to the taxpayer
(e.g. 1099, K-1, 3922), receipts, cancelled checks, and appraisals
Who is required to file Form 1040? A U.S. citizen or resident of the United States or Puerto Rico who meets the filing
requirements (income or other); nonresidents may need to file Form 1040-NR
Define gross income for filing-requirement purposes. All income received in the form of money, goods, property and services that isn't exempt
from tax; includes foreign-source income, non-excluded gain on sale of home, the
taxable portion of Social Security, business gross income (not losses), and capital gains
(not losses)
What counts as earned income? Salaries, wages, tips, professional fees, taxable scholarships and grants, and income from
a business the taxpayer owns
,What counts as unearned income? Taxable interest, dividends, capital gains, unemployment compensation, taxable Social
Security benefits, pensions, annuities, and distributions of unearned income from trusts
Scenario: Joey, 21, Single, not claimable as a dependent, No; his total income of $15,500 is below the $15,750 minimum required to file
earned $12,000 in wages plus $2,500 dividends and $1,000
interest in 2025. Must he file?
Scenario: Monica, 21, Single, not claimable as a dependent, Yes; her self-employment earnings are $400 or more, which triggers a filing requirement
earned $12,000 in her grass cutting business plus $2,500 regardless of the $15,750 threshold
dividends and $1,000 interest in 2025. Must she file?
When is the 2025 Form 1040 due, and what is the general due- April 15, 2026; the 15th day of the fourth month following the end of the tax year, moved
date rule? to the next business day if it falls on a weekend or holiday
Which form gives an automatic 6-month extension to file, and Form 4868; extends filing to October 15, 2026 (it is NOT an extension to pay - estimate
to what date for 2025 returns? and pay the amount due with the 4868 or face interest and penalties)
Who qualifies for the automatic 2-month "outside the U.S." A U.S. citizen or resident living outside the U.S./Puerto Rico whose main place of business
filing extension, and to what date? or post of duty is outside the U.S./PR, or who is in the military outside the U.S./PR;
extends to June 15, 2026, but is not an extension to pay
A taxpayer abroad already has the automatic June 15, 2026 Yes; file Form 4868 for an additional 4 months, to October 15, 2026
extension. Can they extend further?
What relief applies in a presidentially declared disaster area? The IRS grants an extension of time to file AND pay (IRS announces the date) for
individual and business taxpayers who live in the disaster area, whose tax records are in
the area, and for relief workers
Who qualifies for the combat zone deadline extension besides Civilian support personnel, Red Cross personnel, and certain correspondents serving in
military personnel? a combat zone designated by the President; it extends time to file AND pay
How is the combat zone extension period computed? 180 days from the later of the last day in the combat zone or the last day of a qualifying
hospital stay from injury in the CZ, PLUS the number of days before April 15 that the
taxpayer entered the CZ in the year the return is due (up to 3 1/2 additional months)
Scenario: Nick entered a designated combat zone January 31, Monday, January 11, 2027; 285 days (180 + 105 days for Jan 1-Apr 15, 2026) after March 31,
2025 and served without injury through March 31, 2026. When 2026 is Sunday January 10, 2027, so it rolls to the next business day
is his 2025 return due?
, What is the failure-to-file penalty rate and cap? 5% of the balance due per month or part of a month, up to a maximum of 25% of the
balance due
What is the failure-to-file penalty if the failure is due to fraud? 15% of the balance due per month or part of a month, up to 75% of the balance due
What is the minimum failure-to-file penalty when a return is The smaller of $525 or 100% of the unpaid tax
more than 60 days late (2025 returns due in 2026)?
If a return is extended and later filed late, when do failure-to- Penalties run from the ORIGINAL due date; there is no failure-to-file penalty if there is no
file penalties start? When is there no penalty? balance due
What is the failure-to-pay penalty rate and cap? 1/2 of 1% (0.5%) of the balance due per month or part of a month, up to 25% of the
balance due
How can an extended filer avoid the failure-to-pay penalty? Pay at least 90% of the balance due by the original due date (with the extension) and pay
the remaining balance when filing
How do the failure-to-file and failure-to-pay penalties interact The failure-to-file penalty is reduced by the failure-to-pay penalty, for a combined 5%
when both apply? per month; the over-60-days rule (smaller of $525 or 100% of tax due) still applies
Scenario: A taxpayer owes $2,000, files 3 months late with no A combined 5% per month (FTF reduced by FTP), so 15% of the balance due over the 3
extension, and pays nothing until filing. What combined months, plus interest
FTF/FTP penalty rate applies each month?
How is IRS interest on unpaid tax determined, and when is it Based on the federal short-term rate, compounded daily and updated quarterly; charged
charged? from the return due date even if an extension was granted, and charged on penalties too;
it can be forgiven if due to IRS error or delay
What are the consequences of knowingly filing or helping to It is a felony punishable by a maximum fine of $100,000 and/or up to 3 years in prison
file a false return (perjury/fraud)?
When is a dependent NOT required to have an SSN/TIN on Only if the dependent was born and died in 2025; otherwise dependents of all ages need
the return? a taxpayer identification number
Who gets an ITIN, how is it obtained, and what is it for? A nonresident or resident alien (including children/dependents) not eligible for an SSN;
file Form W-7 with the IRS; it is for tax purposes only
