- Hello, and welcome.
My name is Roger Philipp of Roger CPA Review.
Today, I wanna talk about how
the new tax reform will affect the CPA exam content.
Now, the Tax Cut and Job Act,
known as the TCJA, was passed on December 22nd of 2017,
and as a result, there were many changes
to the tax code.
This is the first revamp of its kind
in over 30 years with significant changes,
so it's significantly changed not only individual tax,
but also, business entity taxes as well.
Let's talk a little bit about how
the TCJA will affect the CPA exam content.
Now, the tax reform will impact all
the sections of the REG exam,
starting in January of 2019.
This can account for as much as 80%
of the regulation exam.
Now, AICPA has been very busy turning
the exam upside-down and shaking out all
the broken pieces and putting it back together
with revised and new multiple choice questions
and task-based simulations,
so they had to go through and make these changes
because normally, when an exam changes,
when material changes, there's a 6-month lag.
In this case, they realized that they needed
so much work to do, they needed to buy until January
of 2019 for those new changes to actually hit the exam.
Now, there are several different types
of changes to keep in mind here.
Some of the provisions are totally repealed
and not replaced, so for example,
there's no more alternative minimum tax,
or AMT, for corporations.
Woohoo, right?
Now, they still exist for individuals,
but it's been repealed for corporations.
There are also quite a few changes
that have been made permanent,
mostly for corporations, such as a new flat 21% tax rate
for corporations versus the old graduated tax rate system,
so that's not bad.
Unless you've already taken your tax course,
then all that stuff that's stuck in your head,
like the old 70% DRD, 80% DRD,
100% DRD, those are the old rules,
the new rates are gonna change from 70 to 50%
and 80% DRD to 65%,
so say goodbye to those old percentages.
Unless you take the exam during 2018 before 2019,
then all those rules that you've already learned
will still be in effect.
It really gets sticky when we get
into the high volume of individual taxation changes,
where many of them are temporary.
By temporary, we mean 2018
until 2026,
when in 2026, it reverts back to the old,
and there are different rules that apply,
depending on the circumstances.
So, there's what we call exceptions,
exceptions, exceptions.
So, for example, unless the AICPA is specific
as to how they're gonna choose to test certain things,
like alimony rules.
Alimony rules are changing, which means that right now,
you gotta know the old and the new.
So, what does that mean?
So, if you got divorced before 2019,
the current rules, what that says is I make a payment
to my ex who I used to love forever,
forget about it, so I pay them,
I take a tax deduction, but it's taxable at their tax rate.
The new rules starting 2019 say differently.
What's gonna happen then is that when I make a check,
I can't deduct it, but the person receiving it,
it's not taxable.
So, my suggestion, check out your marriage,
if it's a little shaky, you might wanna consider
getting divorced during 2018,
otherwise you don't get a deduction starting in 2019.
Practical advice.
Wait, it gets better.
We have some tax provisions that are entirely new
and pretty complicated,
like the 20% qualified business income deduction,
QBI, and that's for certain pass-through entities
like escorts and partnerships.
The IRS still doesn't have all
the answers on this one,
so that's why it's a little bit gray.
Now, the blueprint, and the blueprint
is what describes the different areas
that will show up on the exam
and how they're gonna get tested,
is it remembering and understanding,
application, analysis, evaluation,
for example, so they're looking into
this from an obsolescence point of view.
What that means is these changes
are still evolving, but we should get a revised copy
of the blueprint by the middle of the year.
Some of the obsolete items like corporate AMT
will be removed from the blueprints,
but new areas and topics will most likely not be added.
So, what that means is,
if they weren't testing the topic before,
then it's likely that they won't test
it in the future, regardless of whether that area changed
because some areas are beyond
the scope of the exam, because they're trying to test
what a newly licensed two-year, second year,
CPA will need to know in the real world.
Now, this doesn't mean that a new deduction,
for example, wouldn't be testable.
A new deduction for individuals
would be testable under what we call topic C,
which is adjustments and deductions
to arrive at AGI and taxable income.
It also doesn't necessarily mean
that you won't see any new representative tasks,
since these are just examples
of what you might see tested under a particular topic.
So, with that being said,
our recommendation is to sit for the REG exam now
during 2018 before the significant changes hit
in January of 2019.
Avoid having to relearn everything
that you've already learned in your college tax classes,
that's why we're here to help you out.
Now, if you need help working the REG exam
into your crazy-busy schedule,
then our new SmartPath predictive technology
is the most effective way to maximize your study time.
It's a data-driven platform that tells you
how much and where to focus your efforts,
so it'll show you exactly what to study
and how much to study, which takes the guesswork out
of CPA exam preparation.
It'll also help you pass the CPA exam much faster.
Now, if you don't feel prepared
to sit for the REG exam now during 2018,
don't worry about it.
As a Roger CPA Review student,
your study materials will automatically
be updated to prepare you in time
for the January 2019 changes.
So, no matter when you take the REG exam,
we've got you covered and we will guide you
on the smart path to CPA exam success.
Thank you very much for your time,
and hey, study hard.