Business entity taxation and payroll tax concepts tested on Enrolled Agent Special Enrollment Examination Part 2.
42 cards · basic cards · AI-written, checked twice. Edit anything.
- What schedule does a sole proprietor use to report business income and loss?
- Schedule C (Profit or Loss from Business)
- A sole proprietor must pay self-employment tax on what type of income?
- Net profit from self-employment
- What is the self-employment tax rate (combined Social Security and Medicare)?
- 15.3% (12.4% Social Security on wages up to the cap, 2.9% Medicare on all net earnings)
- How much of the self-employment tax can a sole proprietor deduct?
- Half of the total self-employment tax (the employer portion equivalent)
- What form do partners use to report their share of partnership income?
- Schedule K-1 (Partner's Share of Income, Deductions, Credits, etc.)
- In a partnership, how is each partner's basis initially calculated?
- The amount of cash and the adjusted basis of property contributed to the partnership
- How does an S-Corporation treat income taxation?
- Pass-through entity; income flows to shareholders' individual returns, not taxed at corporate level
- What form do S-Corporation shareholders receive to report their share of income?
- Schedule K-1 (Shareholder's Share of Income, Deductions, Credits, etc.)
- What is the primary tax disadvantage of a C-Corporation?
- Double taxation - income is taxed at corporate level, then dividends taxed again at shareholder level
- What type of income are C-Corporation dividends for the shareholder?
- Qualified dividend income (taxed at preferential capital gains rates if requirements met)
- How does a Limited Liability Company default to being taxed if no election is made?
- Single-member LLC as sole proprietor; multi-member LLC as partnership
- What is the Social Security wage base for 2024?
- $168,600 (subject to annual adjustment)
- What are the two components of FICA tax?
- Social Security (6.2% employee) and Medicare (1.45% employee)
- What is the Medicare tax rate for employees earning over $200,000 (single)?
- 1.45% regular Medicare plus 0.9% Additional Medicare Tax = 2.35%
- Who must pay the employer portion of FICA taxes?
- The employer (or the self-employed person for self-employment tax)