Understanding Business Taxes

The video discusses various types of taxes applicable to businesses, focusing on income taxes. It explains the two main tax regimes: partnership and corporate taxation, including S Corps and C Corps. The video details how corporate entities are taxed, the concept of flow-through taxation for S Corps and partnerships, and the role of FICA taxes. It highlights the differences in tax treatment between S Corps and partnerships, particularly regarding active and passive income. The video concludes with a summary of how business taxes work in the U.S.

Which of the following is NOT a type of tax a business might be subject to?

• Income tax

• Sales tax

• FICA tax

• Excise tax

What is the current corporate tax rate in the United States as of 2023?

• 30%

• 21%

• 15%

• 25%

How are profits and losses handled in an S Corporation?

• They are taxed at the corporate level.

• They are exempt from taxation.

• They are reinvested into the business.

• They are distributed to owners and taxed at the personal level.

What form is used to report distributions or dividends to individual owners in an S Corporation?

• Form 1099

• Form W-2

• Form 1040

• Form K1

What is the primary purpose of FICA taxes?

• To provide unemployment benefits

• To finance infrastructure projects

• To support public education

• To fund Social Security and Medicare

In an S Corporation, which type of income is NOT subject to FICA taxes?

• Wage income

• Earned income

• Active income

• Passive income

How is income treated for a partner working in a partnership they own?

• As passive income

• As active income

• As dividend income

• As exempt income