I never really gave it much thought before, but at age 44, I’m actually considered an old-timer in the business. I was reminded of this recently when one of our bookkeepers decided that she was going to take the Special Enrollment Examination, the test that individuals take to become an enrolled agent.
She explained what the exam is like today, and I was shocked. I knew that the test had been changed, but honestly, after I passed that sucker, I never, ever wanted to hear about it again. Almost 17 years later, it still sends a chill down my spine.
I passed the exam in 2000; however, that was not the first time I took it. My first attempt was in 1999, and I passed three out of four parts of the exam. I had to retake Part 1 in 2000. That test was a two-day, four-part exam. Part 1 was Individuals, Part 2 was Sole-Proprietorships and Partnerships, Part 3 was Corporations and S Corporations, and Part 4 was Retirement Plans, Trusts, Estates, and Ethics.
In 1999, you had to take all four parts at the same time. You had to pass at least two parts of each to not have to retake that part of the exam. You had to study for all four parts of the exam at the same time. In addition, the test was given only once a year in the fall.
You would get your results about four to five months after you took the test. The exam was so hard that when you got your results, you would see that about 10 percent of the questions were thrown out because they had no answer, about 5 percent of the questions had more than one answer, and the test was graded on a curve so you never knew what the passing score was.
Did I mention that you couldn’t use calculators? That’s right. I had to figure out complex installment sales by hand.
Each part, except for Part 4, had 100 questions. There were true and false questions that were worth one point, multiple-choice questions that were worth two points, and finally, multiple-choice questions that you had to mathematically figure out for three points. I believe Part 4 had 75 questions and they were all true and false.
I realized real quick that I had to be smart about how to take the exam. When the test started, I went directly to the questions worth three points while I was fresh and got those out of the way. I then did the questions that were worth two points, and then finished with the questions worth one point.
The study prep was from the end of tax season up until testing day. It took that long to study for the exam. In those days, we were tested on every exception to tax law. For instance, you’d have to know what the law is, and then you’d have about 15 detailed exceptions to the law. The test would include questions about one of the exceptions, so you had to know your stuff. When I took the test, the pass rate was only 30 percent. Today, it’s at 60 percent.
When our bookkeeper told me about the exam today, I was floored. First of all, the IRS no longer administers the exam. Secondly, there are only three parts, and you can take the test part by part until you pass the exam. Thirdly, you can use a calculator! Finally, I talked to four different people who took the test in 2005 before it was changed, failed the exam, and had to retake it in 2006 when the changes first went into effect. They all said the exam was so much easier.
What does all of this mean? It just means that I have become my father because I’m talking about how kids today have it so much easier. No, I didn’t walk three miles, uphill both ways, in the snow to school barefoot, but I did take the enrolled agent exam when it was a much more vigorous test.
When I complained about this in a National Association of Enrolled Agents group on Facebook, I was met with responses like: “That is old news” and “I bet you couldn’t pass the new exam.” I took the guy up on passing the test. I told him if he pays for it, I will happily take the exam. Why not? You get CPE for it.
About Craig W. Smalley, EA
Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as representation before the IRS regarding negotiations, audits, and appeals. In his many years of practice, he has been exposed to a variety of businesses and has an excellent knowledge of most industries. He is the CEO and co-founder of CWSEAPA PLLC and Tax Crisis Center LLC; both business have locations in Florida, Delaware, and Nevada. Craig is the current Google small business accounting advisor for the Google Small Business Community. He is a contributor to AccountingWEB and Accounting Today, and has had 12 books published on various topics in taxation. His articles have also been featured in the Chicago Tribune, New York Times, Yahoo Finance, Nasdaq, and several other newspapers, periodicals, and magazines. He has been interviewed and been a featured guest on many radio shows and podcasts. Finally, he is the co-host of Tax Avoidance is Legal, which is a nationally broadcast weekly Internet radio show.