Cramming for a test can be stressful, if you don’t stay focused on the most-tested material. One way to make cramming less stressful is to think through a plan and stick with it. The REG test on the CPA exam is particularly challenging, since it cover business law, ethics, and taxes. Use these tips to cram for the REG test and pass this section of the CPA exam.
Handling the business law section
Most CPA candidates take a business law class as a part of their undergraduate work, and if you’re taking the exam right after college, you may remember a fair amount about business law. If you’re working as an accountant, you may deal with business law concepts in your day-to-day work. Assume, for example, that you work in a business that sends workers into the field, maybe salespeople or technicians. If that’s the case, your firm is a principal and the workers are acting as agents, and there are business law issues your company must address.
My point here is that the business law concepts on the REG test may be more familiar than the tax topics. So, if you’re cramming and need to prioritize, spend most of your time on tax issues. The exception, of course, would be if you work in tax accounting.
What kind of income?
When you see a tax question about income, the first step is to identify what type of income is addressed in the question. When people think of taxes, they are usually thinking about income taxes. However, the REG test also covers gift taxes, which is a tax imposed on gifts above a certain dollar amount. The estate of a deceased individual is taxed through the estate tax system. You need to know the type of tax is being assessed because each type of tax uses different tax rates. For example, $50,000 in personal income is taxed at a different rate than $50,000 in gifts.
Print the individual tax return
I’ve seen many CPA candidates approach the tax section by memorizing tax rates, income amounts and other facts by flipping through index cards. Sure, there are lots of facts you need to know, but there are other methods that can make the process easier.
The majority of the tax questions cover individual income tax, so print out a copy of the Form 1040 tax return, which is currently two pages long. Next, print off a copy of Schedule A (Itemized Deductions), Schedule B (Interest and Dividend Income) and Schedule D (Capital Gains and Losses). Put these forms near you as you study for the tax section.
Now, let’s say you get a tax question on medical expenses. You scan the Form 1040 and remember that medical expenses are an itemized deduction, which is listed at the top of page 2 of the Form 1040. You find medical expenses on Schedule A, and then move to answer the question. If you do this with every tax question, you’ll start to visualize where each tax transaction is located on Form 1040. Now, all of these facts and figures can start to connect. You’ll get to the point where you’ve memorized Form 1040, and it makes studying individual taxes so much easier.
You can pass the REG test — it just takes some planning. Use these tips to create a study plan so that your cramming efforts are successful. Also, check out our post on cramming for the AUD test — even if you don’t need to cram, it has great tips for focusing on what you need to know.