Which of the following statements is true regarding compensation paid to an owner of an entity taxed as a partnership who works for the entity?
A)The compensation is deductible by the entity.
B)The compensation is self-employment income to the owner-worker.
C)The entity is not required to withhold FICA tax on the compensation it pays to the owner.
D)All of these choices are correct.

Question

Quizplus · Accepted Answer

A) The compensation paid to an owner of an entity taxed as a partnership who works for the entity is deductible by the entity as a business expense.
B) The compensation is considered as self-employment income to the owner-worker and is subject to self-employment tax.
C) The entity is not required to withhold FICA tax on the compensation it pays to the owner as the owner's share of net earnings from self-employment is subject to self-employment tax rather than FICA tax.

Therefore, all of these choices are correct.

Which of the Following Statements Is True Regarding Compensation Paid