S Corporation's Subject to Passive Income Taxes

S corporations have many limitations and unique rules. The S corporation is generally a pass-through entity, which means the entity does not pay income taxes directly, because the earnings are passed through to the owners and reported on their personal tax returns.

In some cases, however, the S corporation may be subject to tax directly on its net passive investment income. And, if the S corporation generates too much passive income, it can terminate the S corporation election.

How to report passive investment tax on Form 1120S:
https://youtu.be/Wcud8q5fXgQ

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DISCLAIMER: I am a licensed attorney and certified public accountant (CPA) in the State of Florida. I am not a financial advisor. The information provided in this video is for entertainment purposes only. No such communication is provided in the course of an attorney-client relationship, and no communication is intended to constitute legal advice. You should speak with your own tax and legal professionals to discuss your circumstances before performing any of the tax, legal or accounting strategies demonstrated in this video. Thank you.