Free EA Exam Practice Questions — All 3 Parts

IRS Publication 519 (U.S. Tax Guide for Aliens) is the primary reference for both resident and nonresident alien tax rules, including the SPT, green card test, dual-status rules, and treaty exemptions. Pub 17 is for domestic taxpayers generally. Pub 54 is for U.S. citizens living abroad. Pub 501 covers filing status and dependents — none of these address alien-specific rules the way Pub 519 does.

Kevin qualifies for Head of Household: (1) unmarried, (2) paid more than half the home costs, (3) his qualifying child (daughter, age 10) lived with him all year. HOH provides a higher standard deduction ($21,900 for 2024) and wider brackets than Single ($14,600). QSS requires a deceased spouse (none here). MFJ requires being married (Kevin is not). HOH is always more favorable than Single when a qualifying child is present.

Married Filing Jointly provides the most favorable tax treatment overall — the widest tax brackets, largest standard deduction ($29,200 for 2024), and eligibility for the most credits. The ranking from most to least favorable is: MFJ = QSS > HOH > Single > MFS. QSS uses the same rates as MFJ but is technically a step below. HOH is better than Single. MFS is the least favorable status with the narrowest brackets and fewest credits.

Under IRC §7701(b)(1)(A), lawful permanent residents (green card holders) are resident aliens taxed on worldwide income — the same as U.S. citizens. The green card test applies regardless of where the taxpayer physically lives. Physical presence outside the U.S. does not change resident alien status. Taxation only on U.S.-source income or ECI is the nonresident alien rule. No 5-year exemption exists.

The failure-to-pay penalty (IRC §6651(a)(2)) is 0.5% per month on the unpaid balance, up to 25% maximum. The 5%/month rate is the failure-to-FILE penalty (a different penalty). The 1%/month rate applies only after IRS issues a final notice of intent to levy. The 2%/month rate does not exist in the IRC.

Form 1040-NR (U.S. Nonresident Alien Income Tax Return) is the required form for nonresident aliens with U.S.-source income. Form 1040 is for citizens and resident aliens only. Form 1040-SR is the age-65+ version of Form 1040, also for citizens/resident aliens only. Form W-7 is an ITIN application — not a tax return.

Form 1040-SR and Form 1040 report identical information — the same income, deductions, credits, and taxes. The ONLY differences are cosmetic: Form 1040-SR uses a larger font for easier reading and includes a standard deduction chart showing the additional amount for age/blindness. It is available to ANY taxpayer age 65 or older (Single, MFJ, MFS, HOH) regardless of income type. It is not limited to Social Security recipients, married seniors, or those with simple returns.

For 2024, the MFJ standard deduction is $29,200 for couples where both spouses are under 65. This is also the gross income filing threshold for MFJ couples under 65. $21,900 is fabricated. $27,700 was the 2023 figure (outdated). $32,300 would apply only if both spouses were 65 or older ($29,200 + $1,550 × 2).

Form 1040-SR is available to any taxpayer age 65 or older by year-end, regardless of income type or amount (IRC §6012). Marcus at 68 qualifies. There is no income limit, no restriction on multiple income sources, and no requirement to use Form 1040 because of pension income. The form is simply a larger-print version of Form 1040 designed for seniors.

A housekeeper (household employee) is in neither the qualifying child nor qualifying relative categories. The qualifying relative "member of household" test requires that the person live with the taxpayer as a member of the household — not as an employee. An employment relationship (with wages) fundamentally differs from a dependent relationship. A foster child, grandchild, and non-resident parent can all potentially be claimed as dependents under the correct tests.

Self-employment tax is calculated and reported on Schedule SE of Form 1040. Schedule D is for capital gains and losses. Schedule E is for supplemental income (rentals, pass-throughs). Schedule A is for itemized deductions.

Under IRC §183, an activity is presumed to be a business (not a hobby) if it shows a profit in at least 3 of the last 5 years, including the current year. Derek qualifies because he profited in 4 of 5 years. Choice A is wrong — the nature of the activity (art, photography) doesn't make it a hobby. Choices C and D invent rules not found in the tax code.

A sole proprietorship must obtain an EIN if it has employees or pays certain excise taxes. Since Sophia has employees and pays FUTA, an EIN is required. Choice A is wrong — sole proprietors CAN need EINs. Choice B is wrong — EINs are not limited to corporations. Choice D is wrong — there is no revenue threshold that triggers the EIN requirement.

A multi-member LLC defaults to partnership tax treatment under the check-the-box regulations. Choice A and D require affirmative elections. Choice B applies only to a single-member LLC.

A sole proprietorship reports business income and expenses on Schedule C of Form 1040. Choice A is wrong because Form 1120 is for C corporations, which require incorporation. Choice C is wrong because Form 1065 requires at least two owners. Choice D is wrong because S corporation status requires incorporation and a Form 2553 election.

Limited partners in an LP are liable only up to the amount they invested. Kevin's maximum exposure is $50,000. Choice A applies to general partners, not limited partners. Choice C overstates protections — limited partners do have exposure up to their investment. Choice D is incorrect because the limit is the investment amount, not a proportional share of the lawsuit.

By default, a single-member LLC is treated as a disregarded entity for federal income tax, and the owner reports on Schedule C (or Schedule E for rental real estate). Choice A and B require affirmative elections (Form 8832 for C corp; Form 2553 for S corp). Choice D requires at least two members for default partnership treatment.

A Limited Liability Partnership (LLP) is specifically designed for professionals such as architects, attorneys, and accountants, giving each partner protection from the malpractice or negligence of the others. A general partnership offers no such protection. A limited partnership requires at least one general partner with full personal liability. An S corporation is a corporation, not a partnership.

Partners pay tax on their distributive share of partnership income whether or not it is distributed (pass-through taxation). Choice A is incorrect because distributions do not determine taxability — the allocable share does. Choice C is wrong because a partnership is a pass-through entity and does not pay entity-level income tax. Choice D is the same misconception as A.

When a business starts mid-year and uses a calendar year, the first tax year is a short tax year running from the date the business begins operations to December 31 of that year. Choice A incorrectly begins from January 1. Choice C is a 12-month period starting from the start date, not a calendar year. Choice D ignores the 2024 activity.

Circular 230 §10.4(b) requires at least 5 years of IRS experience in a position that involved interpreting and applying the Internal Revenue Code and Regulations. The experience must be specifically in interpreting the Code, not just any IRS job. Options A (2 years), C (3 years, any position), and D (10 years, any federal service) all state incorrect requirements.

Circular 230 §10.6(e) requires EAs to complete at least 72 hours of qualifying CE per three-year renewal cycle, with a minimum of 16 hours each calendar year, including at least 2 hours of ethics annually. Option A states the wrong total (60). Option C states incorrect totals. Option D is incorrect because there is an annual minimum of 16 hours.

The IRS requires all paid tax preparers to obtain a PTIN regardless of whether they are full-time, part-time, or casual preparers. There is no minimum number of returns or hours threshold. Options A and B incorrectly suggest that part-time or weekend work exempts a preparer. Option D incorrectly imposes a 10-return threshold that does not exist.

Under Circular 230 §10.4, a candidate who passes the three-part EA exam must file Form 23, Application for Enrollment to Practice Before the Internal Revenue Service, within 1 year of passing the exam. Option A (6 months) and Option C (2 years) state incorrect timeframes. Option D is wrong because there is indeed a deadline.

Circular 230 §10.7(c) specifically allows immediate family members—including a spouse, child, parent, brother, or sister—to represent a taxpayer before the IRS. Sophia qualifies as Marcus's sister. Option A is too restrictive. Options C and D impose conditions that do not exist under the regulation.

Circular 230 §10.2 explicitly includes providing a client with written tax advice on one or more Federal tax matters as practice before the IRS. Option A is incorrect because merely preparing without signing does not constitute practice. Option C is incorrect because advice given to a friend informally is not the regulated professional relationship covered. Option D is wrong because Circular 230 only governs Federal, not state, tax matters.

Under Circular 230, corporations, LLCs, partnerships, or any entity other than an individual are not eligible to practice before the IRS. Only individuals can represent taxpayers. An LLC cannot represent its member. Options A, C, and D all represent individuals or individuals acting in a specific capacity, all of which are permitted under Circular 230.

Under Circular 230, unenrolled preparers without AFSP have virtually no representation rights for tax returns signed after December 31, 2015. Option A is wrong because without AFSP, preparers cannot represent even for returns they prepared. Option C describes AFSP rights, not the rights of an unenrolled preparer without AFSP. Option D is incorrect because a notarized POA does not grant representation rights to unqualified practitioners.

Under Circular 230 §10.3, CPAs in good standing have full practice rights before the IRS, including representing taxpayers at conferences, hearings, and meetings. Option A is wrong because CPAs do not need an EA credential. Option C is wrong because practice rights are not limited by tax type. Option D is wrong because while Form 2848 is normally required, the statement that she cannot communicate at all without it overstates the rule regarding who qualifies for full practice.

Under Circular 230, all CE courses must be approved by the IRS and provided by IRS-approved CE sponsors. Simply being accredited by a university, employing CPAs, or offering online courses does not qualify a provider. Options A, C, and D all describe entities that may or may not be IRS-approved CE sponsors but do not guarantee that qualification.