How the Tax Cuts and Jobs Act impacts CPA Exam candidates

Each year, the CPA Exam is updated to include relevant topics based on new legislation, updates to the Authoritative Literature by the AICPA, or other changes affecting the business environment. As a CPA Exam candidate, knowledge of what these updates are and when they go into effect can be critical; they’re huge indicators of what you need to be studying.

In 2019, we’re going to have big changes coming to the CPA Exam. The AICPA recently announced they are developing a timeline for the inclusion of the Tax Cut and Jobs Act in future CPA Exams. I know this sounds a little scary, but don’t worry; we’ve got all the info you need here, including what’s included in the new bill, where it’s going to be tested, when we’ll see it on the CPA Exam, and why taking REG now is an awesome idea.

What is the Jobs Act?

In December 2017, Congress passed the Tax Cuts and Jobs Act, the most sweeping update to the U.S. Tax Code in more than 30 years. The goal of the bill is to decrease taxes, increase income, increase jobs and increase opportunity for both individuals and businesses here in the United States. While the bill itself is extensive, we’ve broken it down into three main takeaways below:

1. The bill lowers both corporate and income tax rates.
2. The standard deduction was doubled, the child tax credit was expanded, and the individual healthcare mandate was repealed.
3. It’s not set in stone: Congress will need to revisit the bill in the future to make some temporary provisions permanent and to make any necessary improvements.

As accounting students and accounting professionals, we know legislature like this is going to impact our work. A tax bill like this affects both individuals and businesses. It will cause changes in both a tax and audit environment, and will certainly affect any business you work for. It’s essential we consider the new bill no matter our line of work.

Despite that, we know you have one burning question if you’re still in full battle with the CPA exam: is it going to be tested?

The short answer is yes, but we’ll explain the stipulations around that answer.

Where are we going to see it?

While the bill affects a multitude of business facets, the exam section to get the big update is REG. The Regulation exam deals mostly with taxes (60-80%), including the taxation of entities, individuals and property transactions. Just looking at takeaway number one above, we know these areas are likely going to see changes once the bill is integrated into the exam. The reality is, since taxation is such a large portion of the REG exam, there’s a high chance much of the tax portion of the exam is going to be different once the bill is integrated into testing.

The other 20-40% of REG deals with business law, ethics, professional responsibilities and federal tax procedures; we’ll likely see some provisions of the new tax bill sprinkled throughout these sections, especially the federal tax procedures section.

When are we going to see it?

The CPA Exam is usually updated 6 months after standards or regulations take effect.  So, you would think the new tax law would begin to be tested in the July/August 2018 exam window. However, according to an announcement by the AICPA, they will not be adding this new tax law to the exam until the January/February 2019 testing window.

Our advice

If you’re just starting to study or are in the middle of taking exams, we highly recommend you focus on completing REG this year, before the Jan. 1, 2019, integration date. As we mentioned above, a large portion of the REG exam could be changing; if you’ve already purchased exam materials, rest assured any changes to the exam will automatically be provided to you so you can be confident that you will be prepared for the exam, regardless of when you end up sitting.

If you’re in the pre-exam boat (you’re still waiting to jump on the CPA bandwagon or you’re still in school), we highly recommend getting your CPA Exam groove on in 2018 and taking the REG exam as soon as possible. By getting materials now and taking the exam, you can avoid being caught in the middle of having materials pertinent to the pre-tax law exam going into 2019 and the updated exam.

Also keep in mind, as mentioned above in key takeaway number three, Congress is going be updating this bill in future years which may or may not come with exam changes. By taking the REG exam this year, you avoid both the large changes that come with the new bill and any updates lawmakers make in future years.

As accounting professionals, we know we can’t avoid the Tax Cuts and Jobs Act. It’s going to be a huge part of our working environment for years to come, no matter what industry we work in. However, by taking the CPA Exam before 2019, we can avoid being tested on the large changes coming with the bill and get on the path to getting those shiny three letters behind our name.

Liz Kolar, CPA, CGMA, has been teaching CPA Review for more than 25 years in the United States, has personally taught more than 2,500 live sessions, and has helped thousands of candidates pass the CPA Exam. She founded Pinnacle CPA Review and co-founded Surgent Kolar CPA Review.