Bayside NY Employee Retention Credit Application

 
Can you take the employee retention credit on the earnings paid out of your S corporation to you, the 100% owner? Now, this is a big debate in the tax expert neighborhood right now. I'm not going to hang my hat on any one position until we get more clarification from the IRS on this, but if I needed to lean one way or the other, I would lean in the instructions of saying that owner wages in so far as we're discussing someone who owns more than 50 percent of business, do not qualify.
  
 
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I do not wish to get too technical here, however Section 2301(e) of the CARES Act -- which developed the employee retention credit -- says that for purposes of the employee retention credit, "guidelines comparable to the rule of areas 51(i)( 1) and 280C(a) of the Internal Income Code of 1986 will use," don't get caught up on the 1986, that's just the last time the Internal Profits Code had a major overhaul, so it's simply described as the Internal Earnings Code of 1986. The vital part here is those other code areas reference.

Let's begin with 280C(a) since that's the easy one. That is just stating that if you get a credit on some wages you pay in your business, you can't double dip and take a reduction for those very same salaries. Now let's talk about section 51(i)( 1 ), which states, "No earnings shall be taken into account ...

with respect to regard individual who person any of the relationships described in subparagraphs (A) through (G) of section 152Aread)( 2) to the taxpayer, or, if the taxpayer is a corporation, to an individual who owns, directly or indirectly, more than 50 percent in value of the outstanding stock exceptional the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who person, directly or indirectly, more than 50 percent of the capital and profits interests revenues the entity." So let's concentrate on the provision that states "if the taxpayer is a corporation" since we're presuming an S corp taxpayer here.Let's focus on the clause that states "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.That is simply saying that if you get a credit on some earnings you pay in your organization, you can't double dip and take a reduction for those same earnings. Let's focus on the stipulation that states "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.

So this is saying that you do not take into account salaries with respect to an individual who owns, directly or indirectly, more than 50 percent in worth of the exceptional stock of the corporation. This is saying that you don't take into account incomes with regard to a person who owns, directly or indirectly, more than 50 percent in value of the impressive stock of the corporation. That seems clear to me that owner earnings do not certify. Now, some tax specialists are looking at the employee retention credit qualified wages FAQs on the IRS website, and they're taking a look at FAQ 59, which states, "Are wages paid by an employer to workers who are related individuals considered qualified wages?

" and they're stating, "Look at the response here. It's only these loved ones whose wages don't count. And the IRS didn't particularly say owner salaries or partner incomes don't count here, so bad-a-boo, bad-a-bing, for that reason owner wages should count." To that, I would say, "Look. The IRS site is not the tax code. That seems clear to me that owner incomes do not qualify. It's only these relatives whose salaries don't count. The IRS site is not the tax code.