Homework Answers
When an employee/shareholder receives an income allocation from an S corporation, what taxes apply to the income allocation?
None of these.
This income will be taxed, but another type of tax will
apply.
Income allocation from an S corporation is taxed in the hands of
shareholders in their personal tax returns and regular income tax
applies on the income allocated.
FICA and self-employment tax are not applied on income
allocated.
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