5 best tips for staying motivated while studying for the EA examBy: Gleim EA Review 
June 27, 2022

Taking the enrolled agent exam is a big commitment, but it’s also an investment that can pay off big in your career. As a tax professional, you recognize the benefits of earning the enrolled agent designation. Becoming an enrolled agent allows you to expand your client base and offer more services. But as rewarding as those opportunities are, you’re still a busy professional who has a life to live outside of taxes! It’s difficult to commit to studying, but the benefits are worth it. Here are our top five tips for staying motivated while you study, so that by next tax season, you can reap the rewards of using two new letters behind your name – EA.  

1. Find your “why”

We hear this about a lot of things in life: “find your why.”  It’s applicable here too. Before you start working toward your goal, first discover why you are motivated to become an enrolled agent. The “why” can be different for everyone, and you aren’t limited to just one. They can be as simple as: 

  • Landing a specific job 
  • Increasing your earning potential 
  • Opening your own tax practice 

Once you determine your “why,” write it down and make sure you post it in places where you’ll see it. Put a sticky note on your monitor at work, your mirror at home and anywhere you’ll spot it throughout the day. But especially leave it any place where you typically find yourself procrastinating and where you actually go to study. It will remind you why you are sacrificing now, so you’re able to get the reward you want later. You can even go a step further and find a picture for your “why” that helps you visualize your end result.  

For example, if you’re planning to use the salary increase you get from earning your EA to get your dream car, find a picture of it. Is your goal to open your own tax practice? Find a picture of the location for your new office or a picture of the sign you’ll put on the door.  

Put those pictures in places that you’ll see daily — maybe as the screen saver on your computer or phone. 

2. Create a plan based on real life

Studying for the EA exam is a marathon, not a sprint. You’re going to have to sacrifice a few things to create a realistic study plan and meet your goals. Set an ideal date for when you want to pass the EA exam to help you create your plan. If you overestimate the number of hours you’ll have available to study and sacrifice more than you mean to from the beginning, you’ll have more difficulty sustaining your plan. This will make you more likely to get knocked off track. And if executing your plan was difficult in the first place, you’re going to have a hard time getting it going again.  

That said, if you aren’t willing to make some small sacrifices now, you won’t have enough time to study, and you’ll find you aren’t ever quite ready to take the exam.  

The solution is simple, in theory at least! Look at your schedule and see what you are willing to cut out, but make sure you don’t cut things you know you won’t be able to do without for an extended period. 

Can you get up a little early several days a week to study? Can you commit half of your lunch break to reading your book or watching video lectures? Can you use your commute to listen to audio lectures instead of your favorite radio station or podcast? 

Small sacrifices can add up to make long-term studying sustainable, and prioritizing the most important aspects of your daily life will help keep you on the right study path. 

3. Get your support team involved

Find your support team. Tell your friends and family what you’ve set out to achieve and why. They’ll be the best ones to support you along the way. They may even call you out at times when they know you should be studying but aren’t. If they know about your goals, they’ll be more understanding if you have to forgo a dinner or movie with them because you need to study. 

Join an EA study group, which is a great way to keep yourself motivated and on track. It’s a group of like-minded individuals who can all relate to the challenges you are facing, such as staying motivated, struggling with that one concept you can’t quite remember, or determining the best time and location to schedule your exam. 

The Gleim personal counselors also work as a support system for you, providing encouragement, accountability and guidance on how to study and make the best use of your time. 

4. Put it on your calendar

Not only should you put your actual exam appointment on your calendar, but you should also include your study times as well. Consider them study appointments. If that feels like too much for your calendar, consider adding your study goals for the week instead. It’s easier to stay on track when you display your goals in a place you look at consistently. 

5. Reward yourself often

This is our last tip, though it’s certainly not the least important. When it comes to staying motivated, rewarding yourself is a small act with a huge impact. Before the week starts, think about what you’ll reward yourself with at the end of the week once you meet your study goals. Will you treat yourself to ice cream, dinner with a friend or go for that hike? Whatever the reward is, plan it ahead of time. Then make sure to follow through and actually reward yourself for all your hard work, because you deserve it. 

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You make the callBy: NATP Research
June 23, 2022

Question: Your client self-prepared their 2019 and 2020 tax returns. Both 2019 and 2020 had a non-farming net operating loss (NOL). The client did not make an election to forgo the NOL carrybacks.

Since NOL carrybacks arising in 2019 and 2020 are subject to the five-year carryback rules, the NOL will be required to be carried back to 2014 and 2015 (respectively). For purposes of amending the returns to carry back the NOL, are 2014 and 2015 considered closed years?

Answer: No. For the purpose of carrying the NOL back, 2014 and 2015 are not considered closed years. Since 2019 and 2020 are within three years from when the tax return is due or, if later, two years from when a tax was paid, the statute of limitations for credit or refund under§6511 considers the NOL carryback years as open years [§ 6511(d)(2)(A)].

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Bankruptcy court awards damages for automated IRS notices By: National Association of Tax Professionals
June 22, 2022

A West Virginia bankruptcy court has ordered the IRS to pay damages after the agency sent automated notices to taxpayers who’d had their tax debt discharged through bankruptcy. The court rejected the IRS’s claim that it had not willfully violated the discharge order because the collection attempts were made through automated delivery systems that were affected by the COVID-19 pandemic

The In re. Williams-McAuliffe (Bankr. N.D.W. Va. 2022) decision by the U.S. Bankruptcy Court for the Northern District of West Virginia found the IRS must pay damages when an employee willfully violates a discharge order by sending a collection notice. It is a violation of federal law to attempt to collect a debt after it has been discharged in bankruptcy.

While the court only awarded the taxpayers $498 in damages (and refunded the $235 fee for reopening the bankruptcy case), the decision is notable for finding the IRS liable for damages taxpayers suffered because of erroneously issued collection notices. In February the IRS suspended most of its automated collection notices after coming under pressure from the Taxpayer Relief Coalition — which includes NATP — and other advocacy organizations because many of the notices were being issued erroneously due to the IRS’s substantial backlog of unprocessed returns.

Couple files for Chapter 13 bankruptcy

The McAuliffes are a married couple who filed for Chapter 13 bankruptcy in 2016, the bankruptcy court said. The IRS filed a bankruptcy court claim seeking $13,625 in unpaid taxes for 2010 and 2011, $7,230 of which was secured. While the couple entered into an installment agreement to repay the IRS, they terminated their agreement and paid their outstanding debt through the Chapter 13 repayment plan. The McAuliffes received a bankruptcy discharge in September 2019 and the IRS received 22% of the unsecured portion of its claim, which was roughly $1,400.

Despite the IRS debt having been discharged, the bankruptcy court said the agency sent the McAuliffes demand letters in February and March 2020 seeking to collect the monthly payment due under the terminated installment agreement. The husband, a bankruptcy attorney, sent a letter to the IRS in March 2020 explaining the error, but sent it to the wrong office. The couple received another collection letter in August 2020.

Despite the third demand letter, the IRS failed to acknowledge the McAuliffes’ March 2020 letter until Sept. 29, 2020, at which point the IRS said it would need 60 days to review their liability. However, contrary to the statement that it would review the couple’s liability, the IRS had already abated their 2010 and 2011 taxes the day before the letter was sent. The IRS attributed the seven-month delay in responding and miscommunication to a combination of the COVID-19 pandemic and the McAuliffes’ mailing their letter to the wrong office.

While the couple’s bankruptcy case was before the bankruptcy court, they incurred additional tax liabilities for the 2018 tax year, which they did not contest. The McAuliffe’s said they intended to enter into an installment agreement for those debts but were prevented from doing so by the IRS’s claims they had unpaid 2010 and 2011 tax debts. The court said they tried to contact the agency in an attempt to enter into an installment agreement regarding their debts for 2018 as early as January 2020.

The bankruptcy court reopened the McAuliffes’ bankruptcy case in December 2020 and the couple filed for an adversary proceeding shortly thereafter. The IRS was granted no relief through administrative remedies, but in August 2021 it sent the couple a letter stating its intent to end their installment agreement and that $1,150 must be paid immediately to avoid default. It also sent a notice of intent to levy. About this time the couple was notified by the IRS that it was accepting their installment agreement to pay their 2018 debts, which was almost 20 months after their initial request.

Taxpayers seek damages based on bankruptcy law

The McAuliffes sought damages under §7433(e) of the U.S. Bankruptcy Code, which allows debtors to seek damages for violations of a bankruptcy discharge.

The IRS claimed the automatic collection notices were “non-threatening” and should not be viewed as a collection action. The court disagreed, noting the letters state that a monthly payment is due immediately and threatens the taxpayer with default if no payment is made. Additionally, the court observed the notice contained no disclaimers stating that it was not trying to collect a debt. “This surely gives the appearance of an attempt to collect, whether sent to a layperson or a well-experienced bankruptcy attorney and his spouse,” it concluded.

Next, the IRS argued that to find a willful violation, the court needed to find that a specific employee violated the discharge order; it also cited cases where courts found that clerical errors were inadvertent. The bankruptcy court found the IRS failed to enter the discharge into its system for almost 12 months and the McAuliffes made multiple attempts to resolve the issue only for the agency to continue trying to collect the debt. It said that those did not qualify as clerical errors.

The IRS also contended the automatic nature of the collection notices removed them from the control of IRS employees, which should shield the agency from penalties intended to punish employee misconduct. The bankruptcy court rejected the argument, finding that if the IRS employees and automated systems are disconnected from the actions of other offices, it is the agency that should be held responsible and not the taxpayer.

Finally, the bankruptcy court did not agree with the IRS’s claim that the COVID-19 pandemic should be taken into account when assessing the agency’s actions. “While COVID-19 is having a significant impact on all levels of the federal government, it does not excuse repeated attempts to collect on a Plaintiff doing everything possible to correct any miscommunications,” the court explained.

Damages based on interest and penalties accrued

The McAuliffes asked the court for damages related to the IRS’s unlawful collection attempts, court costs and legal fees. Among other things, the couple claimed they accepted an offer for their house that was $15,000 below its market value because they were concerned about the notices they were receiving from IRS about the discharged tax debt. However, the court found the sale took place nearly a year after they received an abatement for their 2010 and 2011 taxes from the IRS; therefore, the claim was speculative and not concretely proven.

The bankruptcy court did award the McAuliffes damages based on the interest and penalties assessed by the IRS on their 2018 tax liability. It found that the interest and missed payment penalties the couple accrued between the time they received their first collection letter until the IRS’s decision to accept their settlement offer were actual damages resulting from the agency’s violation of its discharge order. It concluded that the interest and failure to pay penalties had increased by $498 during the time between the IRS issuing the March 2020 notice and the time the IRS accepted an installment agreement.

For more information on bankruptcy, installment agreements and other collection alternatives, check out the NATP’s on-demand online workshop on resolving back tax debts.

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About NATP

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As tax laws change, you can rely on NATP for professional advocacy within the government, guidance on how to apply updated federal tax code to your clients’ unique situations and relationships with communities of other tax professionals to help foster your career. Explore NATP.

If you’re a taxpayer looking for an expert to help you with your tax planning and preparation, look to the industry’s top preparers. Choose an NATP member.

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