Final answer:
The excess net passive income tax applies to an S corporation when it has significant passive investment income and accumulated earnings and profits from prior C corporation years. Individual owners of a corporation pay federal income taxes, employment taxes, and other applicable taxes, while self-employed individuals pay self-employment taxes. Social security tax is considered regressive.
Step-by-step explanation:
The excess net passive income tax applies to an S corporation when two specific conditions are met: a) The S corporation has significant passive investment income, and b) The S corporation has accumulated earnings and profits from prior C corporation years. The existence of a fiscal year-end or the number of shareholders (more than 100 shareholders) is not relevant for this specific tax.
For an individual who owns a corporation and is the only employee, different types of federal taxes that must be paid include income taxes on the corporation's profits, employment taxes (which comprise of social security and Medicare taxes), and any other applicable federal taxes such as excise or sales taxes dependent on the nature of the business. If the individual was self-employed and the business was not incorporated, they would have to pay self-employment taxes, which cover the Social Security and Medicare taxes. The social security tax rate is 6.2% on employees' income below $113,000, which is a regressive tax, as it does not increase in percentage with higher income levels, up to the threshold.