100+ Free CPA REG Practice Questions

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Question 1

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Under Treasury Department Circular 230, a tax practitioner who knows of a client's omission from a previously filed return must:

Immediately disclose the omission to the IRS in writing

Refuse to prepare any future returns for the client

Promptly advise the client of the omission and the consequences of not correcting it

Withdraw from the engagement within 30 days

to track

2026 Statistics

Key Facts: CPA REG Exam

4 hours

Exam Length

AICPA Uniform CPA Exam

Passing Score (0-99)

AICPA scaled scoring

~63%

Pass Rate

AICPA 2024-2025 cumulative

50/50

MCQ / TBS Weighting

~72 MCQs + 8 TBSs

OBBBA

2026 Update

Testable starting 7/1/2026

30 months

Section Validity

NASBA rolling window

The CPA REG section is a 4-hour exam with ~72 MCQs and 8 task-based simulations weighted 50/50. Passing score is 75 on a 0-99 scale, and REG has the highest pass rate of the three Core sections at ~63%. The 2026 exam is testable on the One Big Beautiful Bill Act (OBBBA, signed July 4, 2025) starting July 1, 2026 — including SALT cap increases, 100% bonus depreciation, §179 expansion, CTC bumps to $2,200, new tip/overtime deductions, and $15M estate exclusion.

Sample CPA REG Practice Questions

Try these sample questions to test your CPA REG exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Under Treasury Department Circular 230, a tax practitioner who knows of a client's omission from a previously filed return must:

A.Immediately disclose the omission to the IRS in writing

B.Refuse to prepare any future returns for the client

C.Promptly advise the client of the omission and the consequences of not correcting it

D.Withdraw from the engagement within 30 days

Explanation: Circular 230 §10.21 requires a practitioner who knows that a client has not complied with U.S. revenue laws or has made an error or omission on any return to promptly advise the client of the noncompliance and the consequences. The practitioner is not required to disclose the omission to the IRS — the duty runs to the client.

2A CPA preparing a client's federal income tax return discovers an aggressive position with a 35% chance of being sustained on the merits. Under IRC §6694, the preparer can avoid the understatement penalty if the position is:

A.Disclosed on Form 8275 — there is a reasonable basis for the position

B.Not disclosed — substantial authority exists

C.Disclosed on Form 8275 — there is substantial authority

D.Not disclosed — there is reasonable basis

Explanation: For an undisclosed non-tax-shelter position, IRC §6694(a) requires substantial authority (~40% likelihood). At 35%, only the lower 'reasonable basis' standard (~20%) is met, so the preparer must disclose on Form 8275 (or 8275-R) to avoid the §6694 understatement-of-tax penalty. Reasonable basis without disclosure is insufficient.

3AICPA Statements on Standards for Tax Services (SSTS) No. 1 addresses:

A.Tax return positions and the level of authority required before recommending a position

B.Use of estimates in tax returns

C.Knowledge of errors in previously filed returns

D.Form and content of advice to taxpayers

Explanation: Under the revised SSTS effective January 1, 2024, SSTS No. 1 (General Standards for Members Providing Tax Services) provides the overarching framework, but the substantive standard on tax return positions — requiring at least a realistic possibility of being sustained or, with disclosure, a reasonable basis — has historically been the SSTS 'Tax Return Positions' rule. Under the 2024 reorganization the position-level guidance is in SSTS 1.

4A taxpayer files a calendar-year 2024 return on April 15, 2025. What is the latest date the IRS may generally assess additional tax under the normal §6501 statute of limitations?

A.April 15, 2027

B.April 15, 2028

C.April 15, 2031

D.There is no limit

Explanation: IRC §6501(a) gives the IRS three years from the later of the due date or the actual filing date to assess tax. April 15, 2025 + 3 years = April 15, 2028. The 6-year period applies if there is a substantial omission (>25% of gross income), and there is no limit for fraud or failure to file.

5Under IRC §6662, the accuracy-related penalty for substantial understatement of income tax (individual) generally applies when the understatement exceeds:

A.10% of tax required to be shown OR $5,000, whichever is greater

B.5% of tax required to be shown OR $5,000, whichever is less

C.20% of tax required to be shown

D.$10,000 in any case

Explanation: Under §6662(d), an understatement is 'substantial' for an individual when it exceeds the greater of 10% of the tax required to be shown on the return or $5,000. The penalty is 20% of the underpayment attributable to the substantial understatement.

6A CPA is contacted by the IRS regarding her client's audit. To represent the client before the IRS Examination Division, the CPA must:

A.Hold an active CPA license; no further authorization is required

B.File Form 2848 (Power of Attorney) signed by the client

C.File Form 8821 (Tax Information Authorization) signed by the client

D.File a written notice of representation with the IRS Office of Appeals

Explanation: While CPAs, attorneys, and enrolled agents are 'practitioners' eligible to represent taxpayers under Circular 230, actual representation before the IRS requires a Form 2848 Power of Attorney, signed by both the taxpayer and the practitioner. Form 8821 only authorizes inspection of information — it does not permit representation.

7Under IRC §7525, the federally authorized tax practitioner-client privilege extends to:

A.Tax advice given by a CPA in any noncriminal tax matter before the IRS or in federal court

B.All communications between a CPA and client, including tax return preparation

C.Only state court tax matters, not federal

D.Only criminal tax investigations

Explanation: IRC §7525 extends a privilege similar to attorney-client privilege to communications regarding tax advice between a federally authorized tax practitioner (CPA, EA, EOR, attorney) and the client, but only in noncriminal proceedings before the IRS and noncriminal federal court tax cases. It does not apply to tax return preparation, criminal matters, or state court proceedings, and it does not cover tax shelter communications with corporate clients.

8An IRS notice of deficiency (90-day letter) gives the taxpayer how long to file a petition with the U.S. Tax Court without first paying the tax?

A.30 days

B.60 days

C.90 days (150 days if outside the U.S.)

D.180 days

Explanation: Under IRC §6213, a taxpayer has 90 days from the mailing date of a statutory notice of deficiency (150 days if addressed to a person outside the U.S.) to file a petition in the U.S. Tax Court. This is the prepayment forum option — no payment of the disputed tax is required to litigate.

9Under Circular 230 §10.34, a practitioner may sign a tax return containing a position that has a reasonable basis but lacks substantial authority only if:

A.The position is adequately disclosed on the return

B.The client signs an indemnification agreement

C.The IRS has previously approved the position

D.The position relates to a tax shelter

Explanation: Circular 230 §10.34(a)(1)(ii) prohibits signing a return with a position that lacks a reasonable basis or that constitutes a willful attempt to understate. For a non-tax-shelter position with a reasonable basis but without substantial authority, adequate disclosure (Form 8275 or 8275-R) is required. Tax shelter positions face the higher 'more likely than not' standard.

10The IRS issues a 30-day letter following an examination. The taxpayer's response options include all EXCEPT:

A.Sign the agreement and pay the proposed deficiency

B.Request a conference with the IRS Office of Appeals

C.File a petition in U.S. Tax Court

D.Do nothing and await a 90-day letter (statutory notice of deficiency)

Explanation: A 30-day letter (preliminary notice) is administrative — Tax Court jurisdiction is triggered only by the statutory notice of deficiency (90-day letter). At the 30-day-letter stage, the taxpayer can agree, request Appeals review, or simply wait for the 90-day letter, after which Tax Court becomes available without paying the tax.

About the CPA REG Exam

REG is one of three Core sections of the Uniform CPA Examination under the CPA Evolution model (2024+). It tests federal taxation of individuals and entities, federal taxation of property transactions, business law (contracts, UCC, agency, securities, employment), and ethics/professional responsibilities/federal tax procedures. The 4-hour exam is split 50/50 between approximately 72 MCQs and 8 task-based simulations. Candidates need a scaled 75 to pass and must complete all 4 sections within a 30-month rolling window.

Questions

80 scored questions

Time Limit

4 hours

Passing Score

75 (scaled, 0-99 scale)

Exam Fee

$300-$400 per section (AICPA / NASBA / Prometric)

CPA REG Exam Content Outline

10-20%

Area I — Ethics, Professional Responsibilities & Federal Tax Procedures

Treasury Circular 230 (§10.21 errors, §10.27 contingent fees, §10.34 unreasonable positions), AICPA Statements on Standards for Tax Services (SSTSs), preparer penalties (§6694(a) unreasonable positions, §6694(b) willful, §6695 procedural, §6713/§7216 disclosure), taxpayer penalties (§6662 accuracy 20%, §6663 fraud 75%, §6651 failure to file/pay), §7525 federally authorized tax practitioner privilege, IRS examination process, 30-day letter, 90-day letter (statutory notice of deficiency), Tax Court vs. District Court vs. Court of Federal Claims, §6501 statute of limitations (3/6/unlimited)

15-25%

Area II — Business Law

Common-law contracts (offer, acceptance, consideration, capacity, legality, statute of frauds), UCC Article 2 sales (firm offers §2-205, battle of forms §2-207, risk of loss §2-509, warranties §§2-313/314/315), UCC Article 9 secured transactions (attachment §9-203, perfection §9-310, PMSI §9-309/9-324, priority §9-322), agency (actual/apparent authority, ratification), partnerships and LLCs (RUPA, formation, dissolution, dissociation), federal securities (1933 Act registration + Reg D/A+/147A exemptions, 1934 Act §10(b)/Rule 10b-5, SOX §302/§404), employment law (FLSA overtime, FICA, FUTA, ADA, ADEA, Title VII, FMLA, workers compensation)

5-15%

Area III — Federal Taxation of Property Transactions

Basis (cost, gift §1015 carryover with dual-basis rule, inherited §1014 stepped-up, §1031 exchanged), holding period §1223, capital gains/losses (netting, $3,000 ordinary offset, carryforward), §1231 property and 5-year lookback, §1245 ordinary recapture (full to extent of depreciation), §1250 unrecaptured 25% rate, like-kind exchanges §1031 (real property only post-TCJA, 45/180-day rules), involuntary conversions §1033, installment sales §453 gross profit ratio, wash sales §1091, §121 home sale exclusion ($250K/$500K), §267 related-party loss disallowance

22-32%

Area IV — Federal Taxation of Individuals

Filing status (single, MFJ, MFS, HOH, QSS), gross income §61 inclusions and §§101-139 exclusions, adjustments to AGI (IRA, HSA, student loan, half SE tax), standard deduction (post-OBBBA $15,750 single / $31,500 MFJ baselines), itemized deductions (medical 7.5% AGI, SALT $40K post-OBBBA cap with phasedown, mortgage interest $750K acquisition cap, charitable 60%/30%/20% AGI limits, casualty in federal disaster only), §199A QBI 20% deduction, credits (CTC §24 $2,200 post-OBBBA, EITC §32, AOTC/LLC §25A, Saver's, dependent care, foreign tax), AMT (post-OBBBA permanent), NIIT 3.8% §1411, kiddie tax §1(g), self-employment tax 15.3%, OBBBA new tip and overtime deductions

28-38%

Area V — Federal Taxation of Entities (Including Tax Preparation)

C corporations (21% flat rate, §351 formation 80% control, §243 DRD 50/65/100%, §172 NOLs indefinite carryforward 80% limit, §163(j) interest limit, accounting methods §448, Schedule M-1/M-3 reconciliation, accumulated earnings tax §531, PHC tax §541, CAMT 15%), S corporations (§1361 eligibility, election Form 2553, §1366 pass-through, §1367 stock and debt basis, §1368 distributions/AAA, §1374 BIG tax 5-year recognition period), partnerships (§721 nonrecognition, §704(b) substantial economic effect, §752 liability allocations, §731 distributions, §734/§743/§754 elections, §736 retirement payments, §707 disguised sales, technical termination repealed by TCJA), trusts and estates (Form 1041, §§641-685, simple vs. complex, DNI §643, grantor trusts), exempt orgs §501(c)(3) and UBTI §511, estate and gift tax (§2503 $19K annual exclusion, $15M unified credit post-OBBBA, GST tax), depreciation (§168 MACRS classes, §179 $2.5M post-OBBBA, §168(k) 100% bonus permanent post-OBBBA), entity classification (check-the-box Treas. Reg. §301.7701-3)

How to Pass the CPA REG Exam

What You Need to Know

Passing score: 75 (scaled, 0-99 scale)
Exam length: 80 questions
Time limit: 4 hours
Exam fee: $300-$400 per section

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

CPA REG Study Tips from Top Performers

1Memorize Treasury Circular 230 §10.34 standards (substantial authority vs. reasonable basis with disclosure) and §10.27 contingent fee restrictions — these appear in nearly every REG exam

2Master the §6694 vs. §6662 vs. §6663 penalty framework (preparer 50%/75%, taxpayer 20%/40%/75%) and statute of limitations §6501 (3/6/unlimited)

3Drill UCC Article 2 (firm offers, battle of forms, risk of loss FOB origin vs. destination, warranties) and Article 9 (attachment vs. perfection vs. priority, PMSI rules)

4Internalize the gift basis dual rules under §1015 and the inherited basis step-up under §1014 — common simulation triggers

5Lock down §1231 netting and §1245/§1250 recapture mechanics — practice multi-step problems with depreciation, holding period, and 5-year lookback

6Know post-OBBBA 2026 numbers cold: SALT cap $40K (phasedown), CTC $2,200, $15M estate exclusion, §179 $2.5M, 100% bonus depreciation permanent, tip/overtime above-the-line deductions

7For C corp questions, master Schedule M-1 reconciliation (book-to-tax), DRD percentages (50/65/100), and the §163(j) 30% ATI interest limit

8S corp basis (stock + debt) and AAA distribution ordering are heavy TBS topics — practice the four-tier distribution waterfall (AAA → AEP → return of capital → capital gain)

Frequently Asked Questions

What is the CPA REG exam pass rate?

AICPA cumulative pass rates show REG running approximately 60-65% — the highest among the three Core sections (AUD ~48%, FAR ~42%). The REG pass rate is higher because the content is bounded (federal tax + business law) rather than the broad GAAP/governmental/NFP scope of FAR. Even so, candidates typically need 100-150 hours of focused study.

How is the CPA REG exam structured?

REG is a 4-hour exam delivered at Prometric. It contains approximately 72 multiple-choice questions across two MCQ testlets and 8 task-based simulations across three TBS testlets. MCQs and TBSs are weighted 50/50 toward the scaled score. The passing score is 75 on a 0-99 scale. Candidates can take a 15-minute optional break between testlets without it counting against exam time.

What does the One Big Beautiful Bill Act (OBBBA) change for REG?

OBBBA was signed July 4, 2025. Provisions with 2024 and 2025 effective dates become testable on REG starting July 1, 2026. Key items: SALT cap raised to $40,000 (with phasedown for high earners), CTC increased to $2,200 indexed, new above-the-line deductions for tip income (up to $25K) and overtime premium (up to $12.5K) for 2025-2028, 100% bonus depreciation made permanent, §179 maximum raised to $2.5M, and $15M estate exclusion permanent.

How is REG different under CPA Evolution?

Effective January 2024, the CPA exam adopted the Core + Discipline model. REG is one of three Core sections (along with AUD and FAR) that all candidates must pass. Candidates then choose one of three Disciplines: BAR (Business Analysis and Reporting), ISC (Information Systems and Controls), or TCP (Tax Compliance and Planning). REG-strong candidates often pair with TCP. Technology skills are now embedded across all sections.

What are the Internal Revenue Code sections most heavily tested on REG?

High-frequency code sections: §61 (gross income), §62 (AGI adjustments), §63 (taxable income), §162 (business expenses), §168 (MACRS, post-OBBBA bonus), §179 (expensing), §199A (QBI), §351 (corp formation), §721 (partnership formation), §1031 (like-kind), §1221/§1231 (capital/§1231 property), §1245/§1250 (recapture), §1361-§1379 (S corps), §704/§752 (partnerships), §6694/§6662 (penalties), and Circular 230 §§10.21, 10.27, 10.34.

How long should I study for REG?

Plan for 100-150 hours of focused study over 8-14 weeks. Suggested allocation: 20-25 hours on ethics + tax procedure (Area I), 30 hours on business law (Area II), 15-20 hours on property transactions (Area III), 30-35 hours on individual tax (Area IV), and 30-35 hours on entity tax (Area V). Aim for 1,500-2,000 MCQs and 30+ task-based simulations before sitting.

What is the testing window for the CPA exam?

Most state boards adopted NASBA's 30-month rolling window in 2024 (some still use 18 months). Candidates have 30 months from the date of passing their first section to pass the remaining three. Sections that fall outside the window expire and must be retaken. Continuous testing means candidates can take REG (or any section) at any Prometric date subject to availability — no testing windows.