Brentwood NY Employee Retention Credit

 
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 huge debate in the tax professional community right now. I'm not going to hang my hat on any one position till we get more information from the IRS on this, but if I had to lean one way or the other, I would lean in the direction of stating that owner earnings in so far as we're speaking about somebody who owns more than 50 percent of business, do not qualify.
  
 
Just how It Works
I do not wish to get too technical here, however Section 2301(e) of the CARES Act -- which created the employee retention credit -- states that for purposes of the employee retention credit, "rules similar to the guideline of sections 51(i)( 1) and 280C(a) of the Internal Profits Code of 1986 shall use," don't get caught up on the 1986, that's just the last time the Internal Income Code had a significant overhaul, so it's simply described as the Internal Profits Code of 1986. The fundamental part here is those other code areas reference.

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

with respect to regard individual who bears 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 worth outstanding stock exceptional 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 focus on the provision that states "if the taxpayer is a corporation" due to the fact that we're presuming an S corp taxpayer here.Let's focus on the clause that states "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.That is just saying that if you get a credit on some earnings you pay in your company, you can't double dip and take a reduction for those exact same incomes. Let's focus on the clause that says "if the taxpayer is a corporation" due to the fact that we're presuming an S corp taxpayer here.

So this is saying that you do not consider incomes with respect to an individual who owns, straight or indirectly, more than 50 percent in worth of the exceptional stock of the corporation. This is stating that you do not take into account wages with respect 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 salaries do not certify. Now, some tax experts are taking a look at the employee retention credit certified salaries FAQs on the IRS website, and they're taking a look at FAQ 59, which says, "Are salaries paid by an employer to staff members who are related individuals thought about qualified wages?

" and they're saying, "Look at the response here. It's just these relatives whose salaries do not count. And the IRS didn't specifically say owner incomes or spouse incomes don't count here, so bad-a-boo, bad-a-bing, for that reason owner earnings need to count." To that, I would say, "Look. The IRS website is not the tax code. That seems clear to me that owner salaries do not qualify. It's just these relatives whose salaries don't count. The IRS site is not the tax code.