Question

S corporation shareholders are subject to self-employment tax on business income allocations from the S corporation if they are actively involved in the S corporation’s business.
A) TRUE
B) FALSE

Answer 1

Answer:

The statement is false

Explanation:

S corporations are pass through corporations, which means income earned is passed to the owners and they are taxed at individual level.

Shareholders of S corporation earns income in the form of wages and distributions. Wages are charged with payroll taxes. S corporation shareholders are not subject to self-employment taxes which is an advantage for them.

Therefore, the statement is false