Video

Hey there! Great question. The "pass-through" part can be confusing. Here's the gist: Those forms (1120S, 1065, 1041) are filed by the business or trust, but they usually don't pay the tax. Instead, the income and losses "pass through" to the owners' personal tax returns. The owners then pay the tax on their individual 1040s. The business gives each owner a K-1 form showing their share of profits or losses. This way, the income is only taxed once, at the individual level. Hope that clears things up!

@@examprepai Thank you for the reply. But at the end of the 1120s, 1065, 1041 forms, there is a column to pay tax. I'll look into the forms again. Thank you.

@@LA2JERSEY Ah, I see what you're referring to. You're right, there are lines for tax on those forms. 1120S (S-Corps): The tax line is usually for special cases, like built-in gains tax. Most S-Corps won't pay tax here. 1065 (Partnerships): Similar story. The tax line is for rare situations, not regular income tax. 1041 (Trusts/Estates): This one's a bit different. Some trusts do pay tax at the entity level, but a lot still passes through to beneficiaries. In all cases, the main business income usually passes through to owners/beneficiaries. Those tax lines are for specific situations, not the regular business income. Good eye for detail! Let us know if you have any other questions.

@@examprepai Thank you so much! Please keep the good tutorials coming.

Thanks for the feedback. We are actively producing our next set of lessons which we aim to make more helpful. In the mean time, if you have specific questions let us know and perhaps we can help!

You're very welcome!

Thanks for the feedback!

Thanks, Danielle. Wishing you success in your studies!

Glad it's helpful! Are you currently studying for the FAR exam or learning accounting in general?

Happy to help, Mashael. Currently studying for the FAR exam, or accounting in general?

@@examprepai Yes, I'm now preparing for the FAR exam. Thanks for your interest!

@@mashaelalshehr Right on! We're a few weeks away from finally launching our paid service with support for FAR, BEC, and AUD exams (REG coming later). We're gifting free premium access to any one exam to early users as our way of saying thanks. You can check it out at beta.examprep.ai - sign up for FAR and you'll receive free access within 24 hours.

Thanks! Glad you got your deposit back.

Thanks 👍 Are you studying for FAR or accounting in general?

@@examprepai yes, i am studying for FAR

@@aanchalbhateja1741 Your timing is good to find us! After years in development we are about to finally launch our paid service in a few weeks, but signing up for our FAR course at this time is still completely free, and users who sign up now get a free lifetime access to a course of their choice. Wishing you good luck passing FAR.

Glad you found it! We just released our FAR lessons recently -- excited to help you pass if you're currently studying for the exam!

Hey Nisal, you are the first user to find and comment on one of our videos! Glad it was helpful to you. Are you currently studying to take the FAR exam, or just learning about the related accounting?