CPA Exam: A Summary of the REG and TCP Blueprints

REG and TCP content areas overlap so it makes sense to talk about them at the same time.

The CPA exam and tax: REG and TCP blueprints comparison | © Nikki Winston, CPA

The changes to the REG section of the CPA exam were more about clarifying content that was testable than they were about adding things. These changes came about because of input from stakeholders: educators, employers, and universities. Some content was already there but needed to be refined in how they were presented.

REG is 1 of the 3 core sections of the CPA exam and covers ethics, CPA licensing and discipline, business law around banking, entity formation, and different contract types. A large part of the exam relates to federal taxes for individuals, entities, transactions (like selling ownership in a business). Nothing too new with REG, but one thing from the changes I want to call out:

Area IV covers individual tax returns and includes an expansion on fringe benefits. Here’s why I find that interesting and so relevant:

The REG section of the CPA exam under CPA Evolution | © AICPA

First, what are fringe benefits? Fringe benefits are additional perks included in an employee's overall compensation package. Company cars, bonuses, and wellness stipends are examples of common fringe benefits that employers offer to attract and retain talent in their companies.

For an employee, the taxable amount of fringe benefits is included in one of those extra boxes on their W-2. When they file their taxes, that fringe amount will be included as part of their gross income. These benefits all sound good, but employees must be aware of the tax implications of fringe benefits so there's no surprises when it's time to file taxes.

Another note on accounting in real life, looking at fringe benefits from the employer's perspective now - which is what you'll see if you're working on the G/L team in the accounting department. Fringe benefits can be choppy on the P&L - bonus expense shows up quarterly vs. monthly, for example. Spend some time understanding the typical transactions that hit this account, and the timing of those transactions to help smooth out those expenses on the P&L. Doing so makes the business storytelling simpler - which is what leadership, the board, and investors appreciate - simplicity.

TCP, or Tax Compliance & Planning, is a new discipline section of the CPA exam.

Note that with CPA Evolution, the CPA exam has 3 core sections and 3 discipline sections. I explain core vs. discipline in the CPA Evolution replay.

It covers similar topics as REG. TCP focuses on tax compliance in reviewing and preparation tax returns, and there's an element of personal financial planning there too. Focus less on adding and subtracting numbers, you have technology to do that for you. Focus more on what's taxable vs. what's not, if there's an issue with a tax return, being able to diagnose and resolve it, otherwise the return could be rejected by tax authorities.

The same applies to tax compliance for entities. Making sure practitioners have the competence to prepare business tax returns, which can be complex. Exercising some common sense in knowing what to look for on business returns. Also making sure practitioners aren't bending tax rules either domestically or internationally.

Notice the skill allocation for TCP, where application is weighted up to 65%. That's more than any other section of the CPA exam. That means you have to know what's going on. The "Application" skill allocation means you know the foundational concepts and you can action or resolve a situation using what you know.

Like the FAR section of the CPA exam, there's little to no "Remembering and Understanding" on TCP. Compare that to ISC where more than half of the exam is Remembering and Understanding.

As you figure out what you need to study, use the CPA exam blueprints as your guide. The blueprints tell you topics that are testable and how much of each topic can show up your exam. Saying that tax compliance and planning is 30-40% of the TCP exam means exactly that. That 30-40% could be multiple-choice questions or a simulation or a research question or a document review or a combination of those. Study to learn the concepts, not to memorize what you read.

The CPA exam can come at you in so many different ways: a simulation, document review, research, or those multiple-choice questions that feel like they never end. Studying to learn the concepts instead of memorizing will benefit you as you prepare for the REG and TCP exams.

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