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Form Instructions 2553 online Bellevue Washington: What You Should Know

An S corporation g. An S corporation (if it was a closely held corporation under section 1361). h. (1) A partner, the officer or employee of his S corporation who is not directly involved in the management of the activities of his S corporation. Or (2) An S corporation that directly and equally owns, or controlled directly and equally a partner, officer, employee, and the S corporation's other shareholders. The amount of the deduction that is allowable by reason of the factors stated in section 1361(b)(3) on an election by a small business corporation pursuant to section 1042(d) is limited to the deduction provided thereunder. In addition to any other penalty imposed for failure to make such an election, any amount of income tax reduced by a deduction for any deduction under section 1361 is subject to the 6 percent Medicare tax on the income of that corporation (for the taxable year in which the election is made) on the excess of the amount of income tax reduced by such deduction over the amount of income tax so reduced.

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