Non-passive income and losses are any income or losses that cannot be classified as passive.
Non-passive income refers to any active income such as wages, business income, or investment income.
Loss or income may qualify as non-passive if the taxpayer annually and actively participates in the business enterprise for more than 500 hours (100 hours if no other partner or colleague works more than the taxpayer during the year).
Other types of income may qualify as non-passive, such as investment income in the form of dividends, sales of investments and interest. Compensation paid for the destruction or theft of property is considered non-passive.
Retirement income such as deferred compensation and social security can also be included as non-passive.
Choice 83(b) is an Internal Revenue Code (IRC) provision that gives an employee or startup founder the ability to pay taxes on the total fair market value of the restricted shares at the time of grant.
The Federal Unemployment Tax Act (FUTA) is a law that imposes a payroll tax on any business with employees; the income generated is used to fund unemployment benefits.
A franchise tax is a fee paid by certain businesses that want to do business in certain states. Contrary to what the name implies, a franchise tax is not a franchise tax.
Business partners, S corporation shareholders, and investors in limited partnerships and certain ETFs use Appendix K-1 to report their income, losses, and dividends.
External economies of scale - these are factors that contribute to the development of business, which are manifested outside the company, but within the same industry.