IRS Enrolled Agent Part 1 Practice Test

Answer choices

1. A. Each individual account must exceed $10,000.
2. B. Only Form 8938 can apply.
3. C. The FBAR aggregate-account threshold, because the test is based on the combined maximum value of foreign financial accounts.
4. D. Foreign accounts are reported only if they generate income.

Wrong-answer review

• A. Each individual account must exceed $10,000.: Incorrect. Each individual account must exceed $10,000. The cited rule instead requires: FBAR is generally required when the aggregate value of foreign financial accounts exceeds $10,000 at any time during the calendar year; FBAR and Form 8938 are separate obligations
• B. Only Form 8938 can apply.: Incorrect. Only Form 8938 can apply. That choice overlooks the controlling point that FBAR is generally required when the aggregate value of foreign financial accounts exceeds $10,000 at any time during the calendar year; FBAR and Form 8938 are separate obligations
• D. Foreign accounts are reported only if they generate income.: Incorrect. Foreign accounts are reported only if they generate income. The facts must first be tested against this rule: FBAR is generally required when the aggregate value of foreign financial accounts exceeds $10,000 at any time during the calendar year; FBAR and Form 8938 are separate obligations

Answer choices

1. A. The loss is always fully deductible.
2. B. The replacement shares have zero basis.
3. C. The transaction becomes ordinary income.
4. D. The current loss may be disallowed and added to the basis of the replacement shares.

Answer choices

1. A. Project the taxable portion, marginal tax impact, estimated-payment needs, and any related retirement-distribution rules.
2. B. Assume the distribution is entirely tax-free.
3. C. Convert it automatically to capital gain.
4. D. Ignore withholding and estimated tax.

Answer choices

1. A. Single only, because an unmarried taxpayer can never use head of household
2. B. Married filing separately
3. C. Qualifying surviving spouse
4. D. Head of household

Answer choices

1. A. Household employment tax solely because the taxpayer is self-employed.
2. B. Alternative minimum tax automatically because the taxpayer owns a business.
3. C. Self-employment tax, generally computed on Schedule SE.
4. D. Net Investment Income Tax on the business's earned income.

Answer choices

1. A. The bonus becomes tax-free because it was contributed to a Roth IRA.
2. B. The bonus is a nontaxable employer gift.
3. C. The bonus is taxable compensation when received; contributing after-tax cash to a Roth IRA does not make the bonus tax-free.
4. D. The bonus is capital gain because it was invested.

Answer choices

1. A. Apply the entire carryover against wages first.
2. B. Recompute the capital-gain netting with the verified carryover before projecting taxable income and tax.
3. C. Ignore the carryover until retirement.
4. D. Convert it to a tax credit.

Answer choices

1. A. Reduce the medical expenses by the full $2,000 regardless of tax treatment
2. B. Do not reduce the medical expenses by a reimbursement that is included in gross income
3. C. Increase the medical expenses by $2,000
4. D. Treat the reimbursement as a charitable contribution

Answer choices

1. A. Carry the prior-year amount forward automatically because it appeared on a filed return.
2. B. Ignore the prior-year return and recompute the carryover only from the client's memory.
3. C. Amend the prior-year return solely because a carryover appears on it.
4. D. Reconcile the carryover to the prior-year return and supporting schedules, then verify the 2025 facts that affect its use.

Answer choices

1. A. Compare timely 2025 payments with the smaller of 90% of 2025 tax or 100% of 2024 tax, then analyze payment timing.
2. B. Compare only the unpaid balance shown on the April 2026 return.
3. C. Automatically assess a flat 3% penalty on the year-end balance.
4. D. File an amended return whenever withholding is less than current-year tax.