Tax Scenarios That Trip Up Even Experienced Preparers

2026-07-10

Last reviewed: July 9, 2026. This article reflects current IRS rules and EA exam requirements as of this date.

Some tax situations look simple and aren't. Even preparers who've been doing this for years get them wrong. Here are the ones that keep showing up.

The December divorce

A couple divorces on December 28. They haven't lived together since March. One spouse earned $40K and the other earned $160K. On December 29, they file as Single for the year.

Wrong. IRS rule: your marital status on December 31 determines your filing status for the entire year. If the divorce decree is signed December 28, they're divorced on December 31. They're Single. If it's signed January 2, they're still married on December 31 and must file as Married Filing Jointly or Married Filing Separately.

One day. $200K in combined income. Completely different tax treatment.

The preparer who files the return without checking the divorce decree date files it wrong.

The inherited IRA from someone who was already taking RMDs

A client inherits a traditional IRA from their aunt. The aunt was 77 and already taking required minimum distributions. The client rolls it into their own IRA and treats it like their own retirement account.

This is wrong in two ways. First, the RMD for the year of death must still be taken if the aunt hadn't taken it yet. Second, the beneficiary generally can't treat an inherited IRA as their own — they have to take distributions over a 10-year period (or meet one of the exceptions for eligible designated beneficiaries).

The preparer who doesn't ask "was the original owner already taking RMDs" creates a penalty situation the client won't discover for months.

The home office that isn't exclusive

A real estate agent works from home two days a week and rents a desk at a brokerage three days a week. They claim the home office deduction for the room they use.

The home office deduction requires exclusive and regular use of the space for business. If the room is also a guest bedroom, or the kids do homework there, or the spouse uses it for their own work — it doesn't qualify, regardless of how much time the agent spends there.

Lots of preparers see "real estate agent with home office" and check the box. The correct question is "does anyone use this room for anything other than your business." The answer is usually yes.

The rental property with personal use

A couple buys a beach house. They rent it out for 10 weeks during the summer. They use it themselves for 4 weeks. They want to deduct all the expenses as a rental property.

Personal use exceeding the greater of 14 days or 10% of rental days changes the property classification. At 4 weeks of personal use against 10 weeks of rental days, they're at 40% — way over the threshold. The property is now classified as a residence with rental use, not a rental property. Deductions are limited. Mortgage interest and property taxes are allocated between rental and personal use.

The preparer who treats it as a pure rental just overclaimed deductions. When the IRS matching kicks in — and it will, because rental income gets reported — the client gets a notice.

The dependent who earns too much

A parent claims their 21-year-old as a qualifying child. The kid is a full-time student, lives at home, and the parent provides more than half their support. Standard qualifying child scenario.

But the kid earned $18,000 from a summer internship. If the child provides more than half of their own support — with $18,000 in earnings, they probably do — the child fails the support test, even if the parent provides everything else.

The rule is not "the parent provides more than half." It's "the child does not provide more than half of their own support." A kid earning $18,000 who spends $10,000 on their own support has provided more than half. No dependency exemption.

This is why practice questions matter

Tax law isn't just knowing the rules. It's knowing which rule applies when the facts look like one thing but are actually another. The only way to develop that instinct is to see a lot of scenarios.

EA Dojo has 4,006 practice questions built exactly like this — real tax scenarios where the obvious answer is often wrong. That's how you learn to spot the trap before your client steps in it.

Need to look up a specific IRS form? Check the IRS Form Lookup — search by number or name. Purpose, filing rules, key sections, and EA exam relevance for 19 common forms.

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