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?
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Schedule C (Profit or Loss from Business)- A sole proprietor must pay self-employment tax on what type of income?
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Net profit from self-employment- What is the self-employment tax rate (combined Social Security and Medicare)?
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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?
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Half of the total self-employment tax (the employer portion equivalent)- What form do partners use to report their share of partnership income?
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Schedule K-1 (Partner's Share of Income, Deductions, Credits, etc.)- In a partnership, how is each partner's basis initially calculated?
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The amount of cash and the adjusted basis of property contributed to the partnership- How does an S-Corporation treat income taxation?
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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?
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Schedule K-1 (Shareholder's Share of Income, Deductions, Credits, etc.)- What is the primary tax disadvantage of a C-Corporation?
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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?
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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?
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Single-member LLC as sole proprietor; multi-member LLC as partnership- What is the Social Security wage base for 2024?
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$168,600 (subject to annual adjustment)- What are the two components of FICA tax?
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Social Security (6.2% employee) and Medicare (1.45% employee)- What is the Medicare tax rate for employees earning over $200,000 (single)?
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1.45% regular Medicare plus 0.9% Additional Medicare Tax = 2.35%- Who must pay the employer portion of FICA taxes?
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The employer (or the self-employed person for self-employment tax)
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