Are you in the process of preparing for the Enrolled Agent exam? In order to become an enrolled agent and work as a certified tax expert, you will need to pass the entire EA exam, which consists of 3 parts. In this Enrolled Agent Exam Part 2 guide, you’ll learn everything that you need to know to about Part 2 of the EA exam so you can prepare effectively and pass efficiently. Specifically, we’ll cover the syllabus, format, difficulty, study tips, and more for this exam part. So, by reading this information, you can be ready to pass EA exam Part 2.
Syllabus: Enrolled Agent Exam Part 2
You must know the content that the Enrolled Agent exam Part 2 covers in order to pass it. Thankfully, the EA exam syllabus contains all of this content.
The Enrolled Agent Exam Part 2 is called “Businesses”. Therefore, this exam part focuses on the business side of the tax code. And in the United States, corporate taxation is more complicated than individual taxation. Therefore, due to this singular focus, many EA candidates regard Part 2 of the exam as more challenging than Enrolled Agent exam Part 1, which addresses individual taxes.
Part 2 of the Enrolled Agent exam has 3 content areas with designated topic lists:
- Business Entities
- Business Entities and Considerations
- Corporations in General
- Forming a corporation
- S corporations
- Business Financial Information
- Business Income
- Business Expenses, Deductions, and Credits
- Business Assets
- Analysis of Financial Records
- Advising the Business Taxpayer
- Specialized Returns and Tax Payers
- Trust and estate income tax
- Exempt organizations
- Retirement plans
You’ll find a further breakdown of the topic lists into specific topics in the IRS Enrolled Agent Special Enrollment Examination Bulletin. By referring to this document, you can see what information the exam questions will ask you about and how much of that information you already know.
Pass Rate: Enrolled Agent Exam Part 2 Pass Rate
To give you a sense of how difficult Part 2 of the Enrolled Agent exam is, you should check out the Enrolled Agent exam pass rates. Again, Part 2 dedicates itself entirely to business taxation. And even though business tax is a bit complex, the Part 2 pass rate has actually come up in the past few years. The pass rate has gone from 57% in 2015-2016 to 65% in 2017-2018.
Enrolled Agent Exam Part 2 Pass Rate
This rise in Part 2 pass rates could be due to an increase in materials and resources to help candidates study for the EA exam. The EA exam pass rates are definitely high when compared to the CPA Exam pass rates, CMA exam pass rates, and CIA exam pass rates. In fact, the average EA pass rate is a full 20% higher than the average CPA Exam pass rate.
However, you can’t let the EA pass rates trick you into thinking that passing this exam will be a walk in the park. On the contrary, the EA exam features dozens of tricky questions about in-depth topics that you must answer in a limited amount of time. Therefore, you can only pass with careful planning and committed preparation.
Structure: EA Exam Structure Part 2
Another key EA exam element with which you must be familiar is the structure.
As the syllabus demonstrates, EA Exam Part 2 has 3 content areas and 14 topic lists. And within these content areas are the following coverage percentages and number of questions:
Enrolled Agent Exam Part 2 Structure
||Number of Questions
|Business Financial Information
|Specialized Returns and Taxpayers
Number and Type of Questions: EA Part 2
Just like the other 2 Enrolled Agent exam parts, Part 2 has 100 multiple-choice questions (MCQs). And, MCQs are the only type of question on the EA exam. These 100 MCQs comprise 85 scored questions and 15 experimental questions. The IRS weighs the 85 scored questions equally and does not score the experimental questions. Therefore, only the 85 scored questions contribute to your Part 2 EA exam score.
However, the exam mixes the 15 experimental questions and the 85 scored questions together, and you won’t be able to distinguish between the 2. So, to pass Part 2, you must give every single exam question your all. You never know which ones will affect your score.
What’s more, the EA exam multiple-choice questions come in 3 different formats. These formats include:
- Direct question: This format is simple: it just asks a basic question. For example, what color is the bird?
- Incomplete sentence: This question type encourages candidates to select the answer option that best completes the sentence. E.g., the color of the bird is…
- All of the following except: Answering an MCQ like this involves candidates to picking the option that fails to meet fulfill the question stem’s specifications. For example, the bird’s feathers are all of the following colors except…
As you can see, these MCQs types aren’t too convoluted. So, developing your familiarity with the exam content and question formats greatly increases your ability to perform well on Enrolled Agent exam Part 2.
Sample EA Exam Part 2 Questions
The IRS provides sample test questions for EA exam Part 2 so you can review the types of questions you’ll see on the exam. Here is one of the sample questions the IRS has shared:
1. If a corporation allows earnings to accumulate beyond the reasonable needs of the business, it may be subject to an accumulated earnings tax
References: IRC § 531; IRS Pub 542, Pg. 17
While the actual EA exam questions will always vary, assessing the sample questions that the IRS has published gives you a good perspective of the exam material and question types. So, if you feel comfortable with the sample questions, you can expect to do well on the exam.
Passing Score and Scoring Process: Enrolled Agent Exam Part 2
Per IRS.gov, the Prometric testing centers administer multiple versions of the test, so the IRS uses a scaled scoring process to ensure comparability between those versions. Each question is worth 1 point, and only the number of questions you answered correctly out of all of the questions determine your exam score. However, the IRS transfers this number to a scale of 40-130 to establish your official exam score. The passing EA exam score on this scale is 105.
You may be tempted to try to figure out exactly how many questions you must answer correctly to pass, but you really shouldn’t worry about it. You won’t be able to tell which questions will contribute to your exam score, so you should instead dedicate your mental energy toward answering to the best of your ability.
Fees: The Cost of the Enrolled Agent Exam Part 2
To take the Enrolled Agent exam, you must pay a testing fee for each of the 3 exam parts. The testing fee is always the same: $181.94 per part. When you schedule an EA exam appointment at a Prometric testing center, you will have to pay the exam fee then.
In the recent past, the IRS raised the EA test fee from $109 to $181.94. The IRS sited these reasons for the substantial enrolled agent exam fee increase:
- Decreased demand from tax preparers (i.e., fewer tax preparers are pursuing the designation, which is good for you because it allows you to set yourself apart from the competition)
- Increased administration expenses
- Increased costs associated with verifying various vendors
How to Pay the Enrolled Agent Exam Part 2 Fee
The IRS does not accept personal checks, money orders, or cash. Instead, they accept credit cards and e-checks. So, make sure you have an acceptable way to pay so you don’t spend all that time studying only to get turned away.
Fees to Retest
In the event that you fail part of the EA exam, you’ll have to register to retake that section and pay the testing fee again. For this reason, passing each part the first time is one of the best ways to save money on the EA designation process.
Other EA Exam Fees
To complete the enrollment process after you’ve passed the exam, you have to simultaneously pay the IRS $30 and submit Form 23. This fee is your enrollment to practice fee, and you must pay it and submit the form within 1 year of passing all 3 exam parts.
One cost for keeping your designation active will be continuing education (CE). You must attend CE seminars or take online CE classes regularly as an enrolled agent. And, the average cost for CE is usually about $200-$200 per year.
Finally, you must also pay maintenance fees on your enrollment to practice.
Total Exam Time and Exam Time Management: EA Exam Part 2
For each part of the EA exam, you will have 3.5 hours of total testing time. But the testing process will also involve completing a pre-exam tutorial and a post-exam customer satisfaction survey, so you’ll end up spending about 4 hours at the Prometric testing center.
You can refer to the on-screen timer to see how much exam time you have left. And you should know that while you can leave the room to get a drink of water or use the restroom, the exam timer will not stop to allow for these activities. The EA exam does not include any standardized breaks, so taking a break depletes testing time.
Managing your time on the EA exam gives you the best chance at success. So, to finish all 100 EA exam questions before your 3.5 hours run out, you should answer each question in 2.1 minutes.
Exam Dates: EA Exam Part 2
The EA exam is available for the majority of the year, but the exam does include a brief blackout period. So, you can sit for the exam during the testing window of May 1-February 28 of the following year. However, you can’t sit during March and April, as the IRS uses these months to update the test according to the most recent tax laws.
Finally, after you pass your first EA exam part, you must pass the other 2 exam parts within 2 years. Otherwise, you will lose credit for the part you passed.
Total Study Hours and Study Plan: Enrolled Agent Exam Part 2
Before you jump into the EA exam Part 2 study process, you should determine how long your studies will last and develop a plan for clocking all that study time.
Among EA review course providers, the answer to the question, “How long does it take to study for the EA exam?” varies. Case in point: Fast Forward Academy tells candidates they should only expect to spend 40-70 hours studying for each exam part. Yet, Gleim EA Review extends their recommended study time for Part 1 and Part 2 each to 80-100 hours. Gleim then suggests 60-80 hours for Part 3.
You can reach these study hour totals faster or slower depending on how many hours you study each week. So, if you put more study hours in on a weekly basis, preparing for Enrolled Agent exam Part 2 will take you fewer weeks to do.
EA Exam Study Time
|# of Study Hours
If you want to pass Part 2 of this exam, you must take your study time seriously. So, when planning your studies, I suggest:
- Studying each major topic area for at least 15 hours and going over each section thoroughly.
- Adjusting your study schedule according to how busy you will be during tax season.
- Putting in at least 10 study hours per week. This step enables you to study habitually and get through all of the material.
Tips for Passing Enrolled Agent Exam Part 2
If you want to successfully pass the Enrolled Agent exam Part 2, you must prepare properly. Following these EA exam study tips will help you do just that.
1. Understand the material
You can’t pass any exam without knowing what it will test you on, so understanding the material should be your first priority in preparing for the EA exam. You need to understand each of the exam topics at an intermediate college level. Therefore, you’ll have to go over the content enough that you break the knowledge barrier of basic memorization.
And, when you use an EA review course, achieving deeper levels of knowledge doesn’t require a lot of extra effort. An EA review course presents all of this information to you via convenient study resources. For example, the textbooks explain the exam content, the video lectures walk you through real-world examples, and the practice questions let you assess your understanding.
If you’ve worked with corporate tax, your experience can help you move past the fundamentals faster. However, you should still review the laws themselves because you can’t know what the questions will ask you about. And again, an EA review course will help you review the laws and be ready for any kind of exam question.
2. Develop a question-answering strategy
When you take EA exam Part 2 (and any other EA exam part), you’ll answer a lot of MCQs. So, you need to develop a strategy for answering MCQs. If you don’t have a good approach, you’ll get overwhelmed and waste time.
1. Read the question carefully
The first part of your approach to answering MCQs well should be to read the question carefully. If you rush through the question stem, you may miss something important and have to read the stem again (which takes time) or answer incorrectly. For these reasons, you should go slowly enough through the question stem that you can understand what it’s saying and accurately infer the purpose of the question the first time.
2. Anticipate the correct answer
Secondly, you should anticipate the answer before you read the answer choices. You’ve spent weeks and months preparing, so you should have a good idea of what the answer will be as soon as you finish reading the question. If you think of an answer before you see the answer choices, you can use the answer choices to confirm or deny that you’ve gone in the right direction with your answer.
For example, seeing your answer among the options verifies that you’re on the right track. On the other hand, not seeing your answer means you need to read the question stem again, as you’ve probably misunderstood something.
3. Read all the answer options
The last step to your MCQ-answering strategy is to read all the answer options. You must read them all so as not to allow any of the distractors to trick you. The distractor answer options may be similar to the right answer, so seeing one of those first could tempt you to make your selection, which would be wrong, and move on. The difference between the right and wrong answer may be a slight nuance. So, to give yourself every opportunity to pick the best possible answer, which is what the exam wants, you must read every option presented.
3. Practice time management
Whether you love or hate multiple-choice questions, the fact that the EA exam consists solely of MCQs has its advantages. For example, managing your time on the EA exam is easier because it limits itself to MCQs and doesn’t also contain case studies or essays.
Remember, only 85 of the EA exam questions are scored, which means you don’t have an excess of opportunities to prove yourself. For this reason, you need to answer every EA MCQ in order to maximize your score. And you can only answer every question by managing your time.
As you recall, you’ll have 210 minutes to answer 100 MCQs. With this time limit, you have an average of 2.1 minutes to answer each question.
Thankfully, well-prepared EA candidates are capable of answering the majority of the exam questions in 1.5 minutes. If you can do the same, you’ll have 60 minutes (1 hour) to review your answers before time runs out.
So, if a tricky question about an obscure tax law trips you up, feel free to work on it for about 2 minutes. Then, answer it, mark it, and move on. You can come back to it during your review time, as you’ll have answered all the other questions by then.
Another reason to answer every question even if you have to guess is that the IRS doesn’t penalize you for wrong answers. So, use this information as even more motivation to develop and follow a time management system for EA Exam success.
Best EA Review Courses: Enrolled Agent Exam Part 2
As your goal for Enrolled Agent exam Part 2 is most likely to pass on your first try, then you need an enrolled agent review course to do so. Studying with an EA review course is the best way to ensure that you’re completely prepared by exam day.
Thanks to improvements in the industry, you have several different EA review courses to choose from. And, finding the best one for you is crucial to your EA exam success. Therefore, you must evaluate your options before you make this big decision. You’ll find the pros and cons of the most popular enrolled agent courses on the market on my comparison page.
The most widely-used EA course is Gleim EA Review. I believe Gleim’s course is one of the best because it features well-written textbooks, the largest test bank of high-quality practice questions available, and several customer support resources.
In the EA review course market, you’ll not only see a lot of course options, but you’ll also see a lot of price points. For example, Gleim EA Review costs $500-$600 depending on the course package. However, you’ll only pay this much if you purchase all 3 parts at once. And while such a purchase involves making a bigger initial investment, it also gives you the best value. And, you can further reduce the cost of your exam prep when you use my enrolled agent course discounts.
More Help for EA Exam Part 2
To further preserve your EA exam budget, you can get all the information you need about the EA exam process for free by signing up for my free EA e-course. This course tells you how to pass each part of the exam on your first attempt. So, learn more now or sign up here!