Cheektowaga NY Employee Retention Tax Credit 2020

 
Can you take the employee retention credit on the wages paid of your S corporation to you, the 100% owner? Now, this is a huge dispute in the tax professional community today. I'm not going to hang my hat on any one position until we get more explanation from the IRS on this, but if I had to lean one method or the other, I would lean in the direction of stating that owner incomes in so far as we're talking about somebody who owns more than 50 percent of the business, do not certify.
  
 
How It Functions
I don't wish to get too technical here, however Area 2301(e) of the CARES Act -- which produced the employee retention credit -- states that for purposes of the employee retention credit, "guidelines comparable to the rule of areas 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 will use," do not 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 Profits Code of 1986. The important part here is those other code areas recommendation.

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

with respect to an individual who bears any of the relationships explained in subparagraphs (A) through (G) of section 152(d)( 2) to the taxpayer, or, if the taxpayer is a corporation, to a person who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation, or, if the taxpayer is an entity aside from 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 focus on the clause that states "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.Let's focus on the clause that states "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.That is just saying that if you get a credit on some salaries you pay in your business, you can't double dip and take a deduction for those same salaries. 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.

So this is stating that you do not consider incomes with regard to a person who owns, straight or indirectly, more than 50 percent in worth of the exceptional stock of the corporation. This is saying that you do not take into account wages with respect to a person who owns, straight or indirectly, more than 50 percent in worth of the impressive stock of the corporation. That appears clear to me that owner incomes do not qualify. Now, some tax professionals are taking a look at the employee retention credit qualified wages FAQs on the IRS site, and they're taking a look at FAQ 59, which says, "Are incomes paid by an employer to employees who relate people considered certified earnings?

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