Bayside NY Employee Retention Specialists

 
Can you take the employee retention credit on the wages paid of your S corporation to you, the 100% owner? Now, this is a big argument in the tax expert neighborhood right now. I'm not going to hang my hat on any one position till we get more clarification from the IRS on this, however if I had to lean one method or the other, I would lean in the instructions of saying that owner salaries in so far as we're talking about someone who owns more than 50 percent of business, do not certify.
  
 
How It Functions
I do not desire to get too technical here, however Section 2301(e) of the CARES Act -- which produced the employee retention credit -- states that for purposes of the employee retention credit, "rules similar to the rule of sections 51(i)( 1) and 280C(a) of the Internal Profits 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 just described as the Internal Income Code of 1986. The fundamental part here is those other code areas recommendation.

Let's start with 280C(a) since that's the easy one. That is just stating that if you get a credit on some salaries you pay in your organization, you can't double dip and take a reduction for those very same salaries. Now let's talk about area 51(i)( 1 ), which states, "No salaries 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 straight, more than 50 percent in value of worth outstanding stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who person, directly or straight, more than 50 percent of the capital and profits interests in the entity." So let's concentrate on the stipulation that says "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.Let's focus on the stipulation that says "if the taxpayer is a corporation" since we're assuming an S corp taxpayer here.That is simply stating that if you get a credit on some wages you pay in your company, you can't double dip and take a reduction for those very same salaries. Let's focus on the clause that says "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.

So this is stating that you don't take into consideration earnings with respect to a person who owns, straight or indirectly, more than 50 percent in worth of the outstanding stock of the corporation. This is saying that you do not take into account earnings with regard to a person who owns, directly or indirectly, more than 50 percent in worth of the outstanding stock of the corporation. That appears clear to me that owner incomes do not certify. Now, some tax specialists are looking at the employee retention credit certified wages FAQs on the IRS site, and they're taking a look at FAQ 59, which states, "Are incomes paid by an employer to employees who are associated people thought about certified earnings?

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