The REG exam brings up one major theme for me: tax. But you never know what you’re going to get. I’ve read forums that stated to only study tax, and then someone comments saying that business law and ethics were not something they should have skipped while studying.
As always, you should study all of the materials pertinent to the exam. In this REG CPA exam breakdown, we’ll look at the related percentages for each section and help you figure out how much time to devote to each.
You should start studying tax early, and you should study tax often. I can’t recommend enough knowing the tax portion of the REG exam like the back of your hand. The following is a breakdown and explanation of each of the tax portions on the exam:
- Federal Taxation on Entities (18-24%) – C-corps, S-corps, partnerships, not-for-profit, trusts and estates will fall in this category. Know how they get taxed. As you can see by the percentage, know this part well.
- Federal Taxation on Individuals (13-19%) – If you took a tax class in college (and you should have), it’s going to help you immensely on this section. You’ll need to know how to characterize income and how to arrive at gross income. You’ll need to know about adjustments and deductions, filing status, AMT and other individual tax related concepts.
- Federal Taxation on Property (12-16%) – You’ll need to know types of assets, basis and holding periods of assets, cost recovery, gains and losses and netting procedures. Keep in mind that the tax basis for these assets is going to be different than the accounting basis. You’ll also want to know about estate and gift taxation.
- Accounting and Federal Tax Procedures (11-15%) – You’ll need to know accounting periods and accounting methods (i.e. cash, accrual). You’ll need to know the general concepts of state and local tax along with tax planning.
As you can see, the tax portion accounts for between 54% and 74% of the exam. Those are huge numbers! By having a firm grasp on all of the tax concepts, you give yourself a great chance of passing.
Business Law (17-21%)
Although tax is extremely important, you can get easy points by knowing the various facets of business law. Study up on agency, contracts, the Uniform Commercial Code (UCC), debtor-creditor relationships, government regulation of business and various business structures. Know what a sole proprietorship or a partnership is and how its different from a corporation.
Many of these are common sense or easily memorized and therefore easy points. So make sure you put in the time to studying them.
For this section, you’ll need to know about Treasury Department Circular 230, the AICPA Standards for Tax Services and the Internal Revenue Code (IRC) of 1986. You’ll also need to know about state boards of accountancy, requirements of regulatory agencies, and legal duties and responsibilities. Again, these are easily learnable and easy points on the exam.
Spend the majority of your REG time studying tax, but don’t neglect business law and ethics. I would give all the concepts, tax, business law and ethics, a thorough study. Then, as you review, study tax most of the time and spend the end of your day going over business law and ethics concepts. This will keep that information fresh in your brain as you hammer through tax. And feel free to check out these REG exam tips!