The next EA Exam cycle begins May 1, 2023; here's a sneak peek of PassKey EA Review's new textbook editions!

Clients ask: How long should I keep tax records? I USED to say six years, but now I scan everything and keep the records forever on an external drive. If you think that's overkill, two recent cases the Tax Court might change your mind. In Amos v. Comm’r (2022, link below), a net operating loss was disallowed because the taxpayer didn't have 20-year-old records to prove the carryover.

In Seaview Trading, LLC v. Commissioner, also decided in 2022, was about a 2001 tax return (yes, 20 years old) that the IRS "displaced" but the company had proof that they had mailed it, then submitted it again to an IRS examiner that asked for it after they lost it the first time. By keeping records, Seaview was able to show that the IRS blew the statute to assess additional tax.

California also has a 20 year collection statute, and I just personally saw a sales tax assessment from CA that was 19 years old on a dissolved business. Better to be safe than sorry, especially as these agencies get more aggressive.

See a great overview on Freeman Law: 

Tax Court in Brief | Amos v. Comm’r | Net Operating Loss Deductions Denied; Penalties Proper

Our user Ran Chen explains how he passed all three parts of the EA Exam with PassKey in 40 days (check out Ran's fantastic charts!). You can read more stories like this in our EA Exam study forum!

Hi, thank you all for providing such a great service, I just passed all three within 40 days, and I want to share with you how I did it. 

My background: I have zero experience in Tax. I am an engineer and moved to the US a few years ago. All my taxes are done through Turbo Tax where I only have w2, mortgage, INT, DIV, capital gain, and nothing else. A few months ago I started to research the financial planning domain, and I found EA is a good start for me that's why I decide to do it. I have a daytime job, so my study is done part-time.

Timeline:

Joined Passkey: Oct 26, 2022
Pass Part 1: Nov 7th (11 days)
Pass Part 2: Nov 23rd (15 days)
Pass Part 3: Dec 5th (11 days)

The major reason I choose Passkey is that I found everyone is recommending their books, and then I google it and found the service, and it provides subscription mode! that's my favorite. 

How I studied

My general method is to go through all videos once (1.5x speed, otherwise I could not focus), 2-3 videos per day, go through slides once, take the practice exam 30-50 times, take the timed exam once, store all the wrong answers and go through it multiple times. I didn't read through the book.

Part 1

Practice Exam: 43 times. Average Score: 73%. Timed Exam: 79%.

Part 2

Practice Exam: 40 times. Average Score: 76%. Timed Exam: 82%.

Part 3

Practice Exam: 36 times. Average Score: 81%. Timed Exam: 92%.

The graphs above are drawn by myself with Google Spreadsheet. I love to record the data and analyze it. 

IRS Exam

The SEE Exam is more detailed than the exam in Passkey, however, since it's scaled based on how other people answer the questions, it's harder, but you might get better scores.

Here is the comparison I have:

The difficulty for me to remember and understand: 1 > 2 > 3

Scores I got in Passkey (high to low):  3 > 2 > 1

Scores I got from the SEE exam (high to low): 2 > 3 > 1 (doesn't quite align with the offline test)

Overall, in Part 1 there are too many things to remember, and I found it most challenging to me. Part 3 everyone says they are easy, but in the real exam, there are also lots of details (like years) I didn't recall. Part 2 is just okay to me.

That's it, I feel I am lucky and wish everyone good luck as well. Thank you all for providing such a great service!

Requesting a Penalty Abatement from the IRS Using Reasonable Cause

In this video, we discuss penalty abatement for individual taxpayers using reasonable cause.

Handout: /files/1388313/Understanding_How_to_Abate_IRS_Penalties_HANDOUT(2).pdf

The full video is available on PassKey Online as a webinar in the Bonus Videos section. 

• The failure-to-file (FTF) penalty
• The failure-to-pay (FTP) penalty
• Accuracy-Related 
• Failure to Deposit Underpayment of Estimated Tax by Individuals
• Other penalties 

TESTIMONIAL

My name is Dan. I have been a full time remote tax preparer for about 1.5 years in a small NYC high-volume firm. In 2022, I have prepped rough 600 returns, spread through 1040s, 1065s and 1120s(s), plus 1 or 2 1120s. 

The brief of this story is: On September 24th, I flew 3,000 miles to one of the International centers city, sat for part 1 on 10/4, part 2 on 10/10 and part 3 on 10/20. Somehow managed to pass all three and score 3s in each topic for all tests (evidence attached LOL). 

In late 2018, I accidentally applied for a virtual assistant role a my current firm, not knowing anything about taxes. What followed was intense interest > taking  masters degree level certificate course in Federal Taxation > Participating in the 2021 AFSP program> and here we are as an EA. 

I have used Passkey's vids and test banks for the last 4 months and the service is absolutely the real deal. I had other workbooks (like 2000 pages) in addition to working under 2 wonderful CPA. My personal and professional opinion about the program is that it belong to the top shelf. After going through nearly the full test bank (yes, I did like 1500 questions for each part), I can reasonably so that passkey is the key to passing. Do I need to add? nope

To the entire Passkey team, receive my gratitude and keep up the good work. 

Asante/Gracias/Danke/Obigado/Shukran/Namaste/Merci/ Thank you.
Dan

Free Stakeholder Circular 230 Course! November 10, 2022. This course satisfies the 2 hour annual ethics requirement for AFSPs and EAs! Free Ethics courses for EAs are hard to find, so sign up before this CE course fills up completely!

Thursday, November 10, 2022

• 2:00 p.m. Eastern,
• 1:00 p.m. Central,
• 12:00 p.m. Arizona and Mountain,
• 11:00 a.m. Pacific, 10:00 a.m.
• Alaska, 8:00 a.m. Hawaii
• (120 minutes)

This free webinar will cover the following:

• Tax Engagement Lifecycle Framework for Regulating Practice before the Internal Revenue Service
• How Circular 230 Applies throughout the Tax Engagement Lifecycle and Best Practices for Practicing Inside the Lines
• OPR Disciplinary Process Contact Information and Resources
• Plus, a live Q & A

Offered with closed captioning. Closed Captioning displays the words that descrbe the audio portion of the program for viewers who are deaf or hard of hearing. Captions are available in English only. All participants who qualify will receive a Certificate of Completion.

Tax Professionals - Earn up to 2 CE Credits.

Category: Ethics

IRS Stakeholder Liaison is an IRS Return Preparer Office Approved CE Provider for Enrolled Agents and Other Tax Return Preparers with valid PTINs and is not NASBA or MCLE accredited. CPAs, attorneys and others licensed by state boards/organizations should check with their respective boards/organizations to determine if credit applies toward their continuing education requirements.  

SIGN UP LINK: https://www.webcaster4.com/Webcast/Page/1148/46789

What happens when a tax refund gets deposited into the wrong bank account?

QUESTION: What happens when a tax preparer enters incorrect Direct Deposit information, and the tax refund gets deposited into the wrong bank account?

ANSWER: It becomes a civil issue between the bank, the client, and the preparer. This is the biggest drawback to direct deposit! If the tax preparer makes an error on the bank account number then it becomes a civil issue, and the IRS essentially washes its hands of the matter. By contrast, a lost or misrouted IRS refund check is easy to replace. Source: https://www.irs.gov/faqs/irs-procedures/refund-inquiries/refund-inquiries-18

SOLUTION: ALWAYS have the client double-check and initial their direct deposit information. Every. Single. Year.

If you have a business as a tax preparer or a bookkeeper, (even if it's just a side gig) we suggest setting up Social Media pages for your business (separate from your personal page). Where you can post tax-related content that will engage your clients and potential new customers. These social media pages are all free to create. We suggest Canva to help you create easy images and templates for your social media content, (free accounts are available). 

Here are links to PassKey's Social Media pages, so you can get an idea of what we mean. Free accounts can be made on all these platforms to help promote your business. 

• Our LinkedIn Business Page: https://www.linkedin.com/company/passkeypublications
• Our Facebook Business Page: https://www.facebook.com/PasskeyPublications
• Our YouTube Channel: https://www.youtube.com/c/PassKeyPublications
• Our Vimeo Channel: https://vimeo.com/passkeylearning

Follow us, and join the conversation!

This fantastic question about the estate tax came from Richie Phillips, one of our forum users. 

 From Richie Phillips

If an individual gives multiple gifts of less than the exclusion amount over their lifetime, do each of these gifts still count toward the aggregate exclusion amount for estate tax?

For example, an individual taxpayer gives gifts to 1,000 people of $15,000 each. This is an aggregate total of $15,000,000. Since each gift was below the annual exclusion amount, does it matter that the aggregate total is above the $11.7 Million aggregate exclusion amount? Or will the taxpayer owe estate taxes on $3.3Million, the amount over the Estate exclusion limit? Hope this question makes sense.

Trying to wrap head around this. Thanks in advance.

From Christy Pinheiro