Retirement Plans and Farmers
This topic covers employer and employee retirement plan contributions, reporting requirements, SEP and SIMPLE plans, prohibited transactions, qualified and nonqualified plans, nondiscrimination rules, farm income, crop insurance, subsidies, conservation payments, farm depreciation, disaster provisions, farm rental, Schedule J, Schedule SE, and estimated tax.
How to study for EA Part 2
Build every answer around entity classification, filing obligation, owner basis, income and deduction character, payroll duties, accounting records, and specialized taxpayer rules.
Core concepts
Concept 1
Retirement Plans and Farmers questions test whether an enrolled agent candidate can apply business tax rules to entity, return, owner, and recordkeeping facts.
Exam cue: Identify the entity, tax year, owner role, form, accounting method, record source, and whether the issue is income, deduction, credit, basis, payroll, or advice.
Concept 2
The best answer usually identifies the business form, tax year, filing obligation, income or deduction character, owner-level consequence, and penalty exposure before calculating.
Exam cue: Check basis, distributions, depreciation, employment tax deposits, QBI limits, method changes, due dates, penalties, and information reporting.
Concept 3
Eliminate answers that ignore entity classification, basis, payroll deposits, accounting method, book-tax reconciliation, or specialized taxpayer filing requirements.
Exam cue: Tie the result to the correct business return, schedule, K-1, payroll form, book-tax reconciliation, owner basis, or specialized taxpayer return.
Risk pitfalls and guardrails
Solving as if every business were a sole proprietorship instead of respecting entity classification and owner-level rules.
Guardrail: Use a 15-second safety pause before finalizing your action.
Calculating a deduction or credit without checking basis, at-risk limits, passive limits, depreciation elections, or payroll compliance.
Guardrail: Use a 15-second safety pause before finalizing your action.
Missing specialized taxpayers such as trusts, estates, exempt organizations, retirement plans, farmers, and rental real estate.
Guardrail: Use a 15-second safety pause before finalizing your action.
Memory anchors
SEP Plan
A SEP plan can allow employer contributions for self-employed persons and employees under simplified rules.
SIMPLE Plan
A SIMPLE plan allows eligible small employers to provide salary reduction retirement contributions.
Qualified Plan
A qualified plan receives tax benefits when it meets statutory requirements.
Prohibited Transaction
A prohibited transaction can create tax consequences for a retirement plan or account.
Nondiscrimination
Nondiscrimination rules prevent qualified plans from favoring highly compensated employees beyond permitted limits.
Farm Income
Farm income includes sales, crop insurance proceeds, subsidies, and other agricultural receipts.
Schedule J
Schedule J can allow qualifying farmers to average farm income over prior years.
Farm Depreciation
Farm depreciation applies business property recovery rules to qualifying agricultural assets.
Farm Rental
Farm rental reporting depends on participation, form, and self-employment tax facts.
Disaster Provision
Disaster-area rules can affect timing, deferral, and casualty treatment for farmers.
Checkpoint rule
Do the check-up only after you can summarize each concept in one sentence and identify one dangerous pitfall from memory.
Knowledge Check (after reading)
Short check-up to confirm understanding of this module.
Check-up Questions
A self-employed consultant with no employees wants a plan allowing employee elective deferrals and employer contributions. Which plan is commonly considered?
For 2025, what is the basic employee elective-deferral limit for a traditional 401(k) plan before catch-up contributions?
Answer all questions to submit.
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Move forward only after this module is stable.
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