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Exam Review

Key Facts: EA Part 2 Exam

100

Official exam questions

https://www.irs.gov/tax-professionals/enrolled-agents/enrolled-agents-frequently-asked-questions

3.5 hours

Exam time

https://www.irs.gov/tax-professionals/enrolled-agents/enrolled-agents-frequently-asked-questions

$317

Fee per part

https://www.irs.gov/tax-professionals/enrolled-agents/enrolled-agents-frequently-asked-questions

2025

Tax year tested

https://www.irs.gov/tax-professionals/enrolled-agents/enrolled-agents-frequently-asked-questions

EA Part 2 uses Tax Year 2025 and tax law through December 31, 2025 for the July 1, 2026–February 28, 2027 domestic window. Each part has 100 questions (85 scored, 15 unscored), 3.5 hours of testing, a passing score of 500 on a 200–800 scale, and a $317 fee.

Sample EA Part 2 Practice Questions

Try these sample questions to review concepts for the EA Part 2 exam. Each question includes a detailed explanation. Start the interactive quiz above for the full 105+ question experience with AI tutoring.

1Which IRS form is used by a business entity to elect its classification for federal tax purposes?
A.Form 2553
B.Form 8832
C.Form SS-4
D.Form 1065
Explanation: Form 8832 (Entity Classification Election) is used by eligible entities to choose how they are classified for federal tax purposes. For example, an LLC can use Form 8832 to elect to be taxed as a corporation rather than as a disregarded entity or partnership. Form 2553 is specifically for electing S corporation status, not general entity classification.
2A single-member LLC that has not filed Form 8832 is treated as what type of entity for federal tax purposes?
A.C corporation
B.S corporation
C.Partnership
D.Disregarded entity
Explanation: By default, a single-member LLC is classified as a disregarded entity for federal tax purposes. This means the LLC is not recognized as separate from its owner, and all income and expenses are reported on the owner's individual tax return (typically on Schedule C). The LLC must file Form 8832 if it wants to elect a different classification.
3Horizon Ventures LLC has four members. The LLC has not filed any entity classification elections with the IRS. How will this entity be classified for federal tax purposes?
A.Disregarded entity
B.C corporation
C.S corporation
D.Partnership
Explanation: A multi-member LLC that has not filed Form 8832 to elect a different classification is treated by default as a partnership for federal tax purposes. It must file Form 1065 and issue Schedule K-1s to each member. A disregarded entity classification only applies to single-member LLCs.
4Which of the following is NOT a characteristic that distinguishes a C corporation from other business entities?
A.Limited liability for shareholders
B.Double taxation of corporate income
C.Pass-through taxation of income to owners
D.Perpetual existence independent of owners
Explanation: Pass-through taxation is a characteristic of partnerships, S corporations, and sole proprietorships, NOT C corporations. C corporations are subject to double taxation: the corporation pays tax on its income at the corporate level, and shareholders pay tax again on dividends received. Limited liability, double taxation, and perpetual existence are all characteristics of C corporations.
5An existing LLC has operated for several years. It makes an elective change from partnership to corporation status effective March 1, 2025. Six months later it wants to elect partnership status again. Without IRS consent, when is another elective change generally permitted?
A.Immediately, with no waiting period
B.After 12 months from the original election
C.After 60 months from the original election
D.They cannot change the election once made
Explanation: An elective change generally bars another elective classification change for 60 months after its effective date, unless the IRS permits an earlier change. An initial election effective on the formation date is not treated as a change for this limitation. A greater-than-50% ownership change can support discretionary IRS consent; it is not an automatic exemption. This question specifies an existing LLC and no IRS consent.
6Which type of business entity provides limited liability protection to ALL of its owners while also allowing pass-through taxation by default?
A.General partnership
B.Sole proprietorship
C.Limited liability company (LLC)
D.C corporation
Explanation: An LLC provides limited liability protection to all of its members while also offering pass-through taxation by default (as either a disregarded entity for single-member LLCs or as a partnership for multi-member LLCs). General partnerships do not provide limited liability to general partners. Sole proprietorships offer no liability protection. C corporations provide limited liability but are subject to double taxation, not pass-through taxation.
7Under the hobby loss rules, an activity is presumed to be a for-profit business if it shows a profit in at least how many of the last 5 tax years?
A.1 out of 5 years
B.2 out of 5 years
C.3 out of 5 years
D.4 out of 5 years
Explanation: Under IRC Section 183, an activity is presumed to be engaged in for profit if it produces a profit in at least 3 out of the last 5 consecutive tax years (2 out of 7 years for activities involving horses). If the activity does not meet this test, the IRS may classify it as a hobby, and deductions are limited to the amount of hobby income.
8Sarah operates a small craft business from her home. She has reported losses for 4 of the last 5 years. She spends 10 hours per week on the activity and does not maintain separate business records. Which factor would MOST support her claim that this is a business rather than a hobby?
A.She enjoys making crafts as a creative outlet
B.She has modified her methods to improve profitability based on professional advice
C.She has other sources of income that offset the craft losses
D.She has not registered the business with the state
Explanation: The IRS considers nine factors when determining hobby vs. business status under Section 183. Modifying methods and seeking professional advice to improve profitability demonstrates a genuine profit motive, which is one of the strongest indicators of business intent. Personal enjoyment and other income sources actually weigh against business classification.
9Which of the following entities is NOT required to obtain an Employer Identification Number (EIN)?
A.A partnership with two partners
B.A sole proprietorship with no employees that does not file excise or pension returns
C.An S corporation
D.A C corporation
Explanation: A sole proprietorship with no employees that does not file excise tax, pension plan, or alcohol/tobacco/firearms returns is not required to obtain an EIN. The owner can use their Social Security Number instead. All partnerships, S corporations, and C corporations must obtain an EIN regardless of whether they have employees.
10A newly formed corporation wants to adopt a fiscal year ending June 30. Which of the following statements is TRUE regarding this election?
A.All corporations must use the calendar year
B.The corporation may adopt any fiscal year by filing its first return for that period
C.Only S corporations may use a fiscal year
D.A fiscal year election requires prior IRS approval in all cases
Explanation: A newly formed C corporation may adopt any fiscal year ending on the last day of any month simply by filing its first tax return for that period. It does not need IRS approval for its initial tax year choice. However, S corporations, partnerships, and personal service corporations generally must use a calendar year unless they can establish a business purpose for a different year-end or make a Section 444 election.

About the EA Part 2 Exam

EA Part 2 is the Businesses portion of the IRS Special Enrollment Examination. This practice page isolates Part 2 so candidates can study business tax topics without receiving questions from Parts 1 or 3. For the 2026–2027 SEE testing cycle, use Tax Year 2025 and federal tax law through December 31, 2025. Unless a question states a different year, “current year” means 2025. Later enactments and later-year amounts do not replace this baseline.

Exam sponsor: Internal Revenue Service (IRS) / PSI Services. The requirements and fees below concern the certification or admission exam, separate from our free practice resources.

Questions

100 questions

Time Limit

3.5 hours (4-hour seat time)

Passing Score

500 on a 200–800 scaled score

Exam / Certification Fees

$317 per part

Exam sponsor website

Fees, eligibility, and exam policies can change. Confirm them with the exam sponsor before applying or paying.

Our practice resources: topics covered

We aim to reflect publicly available exam outlines and topic information in our study resources. Coverage, format, and difficulty may differ from the actual exam, and we cannot guarantee that every detail is accurate or current. Confirm exam requirements, fees, and policies with the official exam sponsor.

30 scored items

Business Entities and Considerations

Entity classification, partnerships, C and S corporations, owner basis, distributions, filing duties, and partnership audits.

37 scored items

Business Tax Preparation

Business income, deductions, depreciation, property transactions, QBI, records, payroll, reporting, planning, and ACA compliance.

18 scored items

Specialized Returns and Taxpayers

Trusts and estates, exempt organizations, retirement plans, farmers, and rental property.

Preparing for the EA Part 2 Exam

What You Need to Know

  • Passing score: 500 on a 200–800 scaled score
  • Exam length: 100 questions
  • Time limit: 3.5 hours (4-hour seat time)
  • Exam / certification fees: $317 per part Official sources

Using Our Practice Resources

  • Work through all 105 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

EA Part 2: Suggested Study Strategy

1Use this bank when your scheduled appointment is specifically for Part 2.
2Review explanations for both correct and incorrect choices.
3Practice in timed sets before attempting a full-length session.

Frequently Asked Questions

Does this practice test include only EA Part 2 questions?

Yes. This question bank is limited to the Businesses part and does not mix in Individuals or Representation questions.

How many questions are on EA Part 2?

The IRS states that each SEE part has 100 questions: 85 scored questions and 15 experimental non-scored questions.

Can I take EA Part 2 before Part 1?

Yes. The IRS permits candidates to take the three SEE parts in any order.

Which tax year and law cutoff apply to this resource?

For the 2026–2027 SEE testing cycle, use Tax Year 2025 and federal tax law through December 31, 2025. Unless a question states a different year, “current year” means 2025. Later enactments and later-year amounts do not replace this baseline.