alaska heating assistance programs policy manual - DPAweb ...

doing business and are not deducted from the gross self-employment
income for the enterprise.
A partnership is required to file an income tax Form 1065 Partnership
Return of Income including Schedule K-1 Partner’s Share of Income,
which shows the income and expenses for the business. Unless the
partnership is a new business, each partner should have a copy of
these forms for reporting their share of the income.
Some partnerships involve a general partner, who is actively involved
in operating the business, and a limited partner, who is an investor
only, not an active participant. The general partner is considered
self-employed and their portion of the income from the partnership
counts as self-employment income. Any income received by the
limited partner is treated as unearned income.
2. Corporations
A business may be a corporation, which is a distinct legal entity with
legal status separate from the individuals who form it. One type of
corporation, the S-corporation, is considered a self-employment
enterprise. It confers a special tax status to shareholders and
operates like a partnership. Income from an S-corporation is taxed at
the individual level and is treated like self-employment income from a
partnership. The income is passed through to the shareholders
based on each shareholder’s pro rata share.
The S-corporation must file a Form 1120-S, Income Tax Return for
an S-Corporation including Schedule K-1 Shareholder’s Share of
Income. Unless the corporation is a new business, each shareholder
should have a copy of these forms for reporting their share of the
income.
Another type of corporation, the C-corporation, is not considered to
be a self-employment enterprise. In the C-corporation, taxes are
paid on business income by the corporation and not by the
stockholders. If profits are distributed to the stockholders as
dividends, the dividend is treated as unearned income to the
stockholder. An individual may receive a salary from a C-
corporation. The salary is counted as wages, not self-employment
income, even if the individual is the primary stockholder in the
corporation. Such wages may include in-kind compensation resulting
from the business paying for personal and household bills. Stocks
that individuals own in these corporations are counted as resources,
even if they are not publicly traded on the stock market.
10/3/2013 9:24 AM Page 72