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Internal Revenue Bulletin:  2016-21 

May 23, 2016 

SELF–EMPLOYMENT TAX


Table of Contents

REG–114307–15REG–114307–15

Generally, for federal income tax purposes, a business entity that has a single owner and is not a corporation is disregarded as an entity separate from its owner (a disregarded entity). However, for purposes of employment taxes, a disregarded entity is treated as a corporation, except that the owner of a disregarded entity who is treated as a sole proprietor for income tax purposes remains subject to self-employment taxes. The current regulations do not explicitly address situations in which the owner of a disregarded entity is a partnership. These proposed regulations address this issue by clarifying that the rule that a disregarded entity is treated as a corporation for employment tax purposes does not alter the self-employment tax treatment of any individuals who are partners in the partnership that owns a disregarded entity.

T.D. 9766T.D. 9766

Generally, for federal income tax purposes, a business entity that has a single owner and is not a corporation is disregarded as an entity separate from its owner (a disregarded entity). However, for purposes of employment taxes, a disregarded entity is treated as a corporation, except that the owner of a disregarded entity who is treated as a sole proprietor for income tax purposes remains subject to self-employment taxes. The current regulations do not explicitly address situations in which the owner of a disregarded entity is a partnership. These temporary regulations address this issue by clarifying that the rule that a disregarded entity is treated as a corporation for employment tax purposes does not alter the self-employment tax treatment of any individuals who are partners in the partnership that owns a disregarded entity.


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