Speculation runs rampant on what to focus on for the REG CPA exam. And there’s no point beating around the bush: if you’re going to pass the REG section of the CPA exam, you’re going to have to know your taxes.
Having said that, you can’t just study tax. You may get lucky and have an exam that has a top range of tax questions (you’ll notice below that tax can be anywhere from 54-74% of the exam). But you’ll be pushing your luck. Not worth it on the CPA exam.
The following percentages come directly from the AICPA’s Content Specification Outline for 2016.
- Ethics, Professional and Legal Responsibility (15-19%)
- Business Law (17-21%)
- Federal Tax Process, Procedures, Accounting, and Planning (11% – 15%)
- Federal Taxation of Property Transactions (12% – 16%)
- Federal Taxation of Individuals (13% – 19%)
- Federal Taxation of Entities (18% – 24%)
What To Study For Tax
Clearly, you have to study tax. It makes up a huge portion of your exam and your grasp of the concepts will likely be the deciding factor in whether you pass. Let’s go over what you need to know for each section:
- Federal Tax Process, Procedures, Accounting and Planning
- Accounting periods and accounting methods
- The end of the tax year is for individuals and entities
- How tax extensions work
- The difference between cash and accrual accounting
- General concepts of state and local tax
- Federal Taxation of Property Transactions
- Types of assets
- Basis and holding periods of assets
- Cost recovery
- Gains, losses and netting procedures
- Estate and gift taxation
- Federal Taxation of Individuals
- How to characterize income
- How to arrive at gross income
- Adjustments, deductions and credits
- Filing status
- Federal Taxation of Entities
- C-corp taxation
- S-corps taxation
- Partnership taxation
- Not-for-profit taxation
- Trusts and estate taxation
I can’t stress this enough, you have to have a good grasp on these concepts. It will give you the best chance of passing the exam.
What to Study for Law and Ethics
While tax is huge, law and ethics are easy points. Knowledge of these concepts is majorly based on memorizing definitions, using common sense and knowing differences. Know the following for law and ethics:
- Business Law
- The Uniform Commercial Code (UCC)
- Debtor-creditor relationships
- Government regulation of business
- Various business structures (i.e. sole proprietorship, limited partnership, general partnerships, s-corp, c-corp, etc.)
- Ethics, Professional and Legal Responsibility
- Treasury Department Circular 230
- AICPA Standards for Tax Services
- Internal Revenue Code (IRC) of 1986
- State boards of accountancy
- Requirements of regulatory agencies
- Legal duties and responsibilities
REG Study Plan
I would take the time to thoroughly peruse ALL of your study materials. Take your time on tax and memorize as much as you can when you do business law and ethics.
When it comes to review time, I would spend the majority on tax. Each day you spend reviewing should start with tax, and when tax is finished, business law and ethics should be reviewed.
I personally believe this is a great roadmap for REG success, and it definitely worked for me. By studying everything initially, you get a nice grasp of all the concepts tested on the exam. But by focusing on tax for review, you can ensure that the more difficult concepts are fresh in your mind when it comes to exam time.
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