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