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Which of the following statements is correct?

a. the amt applies to both the individual taxpayer and the c corporation.
b. the individual amt rates are 26% and 28%.
c. the s corporation amt rate is 20%.
d. only a. and b. are correct.
e. a., b., and c. are correct.

User Romo
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1 Answer

2 votes

Final answer:

The correct statements are that the AMT applies to individual taxpayers and C corporations and that the individual AMT rates are 26% and 28%. S corporations do not have an AMT rate because they are pass-through entities. An individual who owns and is the sole employee of a corporation pays corporate income tax, individual income tax on their salary, and payroll taxes. Therefore, the correct option is A.

Step-by-step explanation:

The correct statement among those given is that the Alternative Minimum Tax (AMT) applies to both the individual taxpayer and C corporations, and that the individual AMT rates are 26% and 28%. The statement about S corporations having an AMT rate is incorrect because S corporations are pass-through entities, which means they don’t pay income tax at the corporate level; instead, income is passed to shareholders and taxed at the individual level. Therefore, the correct answer is D, only statements A and B are correct.

As for an individual who owns a corporation and is the only employee, they would have to pay several types of federal tax, including:

  • Corporate income tax on the corporation's profits.
  • Individual income tax on their salary taken from the corporation.
  • Payroll taxes, which includes Social Security and Medicare taxes, taken out of the wages they pay themselves.

Moreover, the social security tax is considered regressive as it is a flat percentage up to an income cap, meaning it takes a smaller percentage of income from high earners than from low earners.

User Thanasisp
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