Bayside NY Employee Retention Grant Program

 
Can you take the employee retention credit on the earnings paid of your S corporation to you, the 100% owner? Now, this is a huge dispute in the tax expert neighborhood right now. I'm not going to hang my hat on any one position up until we get more clarification from the IRS on this, but if I had to lean one method or the other, I would lean in the direction of saying that owner wages in so far as we're speaking about someone who owns more than 50 percent of business, do not certify.
  
 
Just how It Functions
I do not wish to get too technical here, but Section 2301(e) of the CARES Act -- which produced the employee retention credit -- states that for functions of the employee retention credit, "rules comparable to the rule of areas 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 will apply," don't get captured up on the 1986, that's simply the last time the Internal Earnings Code had a major overhaul, so it's simply described as the Internal Revenue Code of 1986. The fundamental part here is those other code areas recommendation.

Because that's the easy one, let's begin with 280C(a). That is simply stating that if you get a credit on some salaries you pay in your service, you can't double dip and take a reduction for those very same wages. Now let's talk about section 51(i)( 1 ), which says, "No wages will be considered ...

with respect to an individual who bears any of the relationships described in subparagraphs (A) through (G) of area 152(d)( 2) to the taxpayer, or, if the taxpayer is a corporation, to a person who owns, straight or indirectly, more than 50 percent in value of the exceptional stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any person who owns, straight or indirectly, more than 50 percent of the capital and profits interests in the entity." So let's concentrate on the provision that says "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.Let's focus on the clause that says "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.That is just stating that if you get a credit on some earnings you pay in your service, you can't double dip and take a deduction for those same wages. Let's focus on the stipulation that says "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.

So this is stating that you do not take into account salaries with regard to an individual who owns, directly or indirectly, more than 50 percent in worth of the outstanding stock of the corporation. This is stating that you do not take into account incomes with regard to a person who owns, straight or indirectly, more than 50 percent in worth of the impressive stock of the corporation. That seems clear to me that owner salaries do not certify. Now, some tax professionals are looking at the employee retention credit qualified wages FAQs on the IRS site, and they're looking at FAQ 59, which says, "Are wages paid by a company to staff members who relate people thought about qualified wages?

" and they're stating, "Look at the answer here. It's only these family members whose incomes do not count. And the IRS didn't particularly state owner wages or partner earnings don't count here, so bad-a-boo, bad-a-bing, therefore owner incomes need to count." To that, I would state, "Look. The IRS site is not the tax code. That appears clear to me that owner salaries do not certify. It's only these family members whose earnings don't count. The IRS website is not the tax code.