Cheektowaga NY Employee Retention Tax Credit

 
Can you take the employee retention credit on the salaries paid of your S corporation to you, the 100% owner? Now, this is a big argument in the tax expert neighborhood today. I'm not going to hang my hat on any one position up until we get more information from the IRS on this, however if I needed 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 qualify.
  
 
Exactly How It Functions
I don't wish to get too technical here, but Area 2301(e) of the CARES Act -- which produced the employee retention credit -- says that for functions of the employee retention credit, "guidelines comparable to the rule of sections 51(i)( 1) and 280C(a) of the Internal Income Code of 1986 will apply," do not get caught up on the 1986, that's simply the last time the Internal Profits Code had a significant overhaul, so it's just described as the Internal Earnings Code of 1986. The crucial part here is those other code areas recommendation.

Since that's the easy one, let's start with 280C(a). That is just stating that if you get a credit on some wages you pay in your service, you can't double dip and take a reduction for those same earnings. Today let's discuss section 51(i)( 1 ), which says, "No salaries shall be taken into consideration ...

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 an individual who owns, straight or indirectly, more than 50 percent in value of the impressive stock of the corporation, or, if the taxpayer is an entity besides a corporation, to any person who owns, directly or indirectly, 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 assuming an S corp taxpayer here.Let's focus on the provision 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 salaries you pay in your company, you can't double dip and take a deduction for those same earnings. Let's focus on the clause that says "if the taxpayer is a corporation" since we're assuming an S corp taxpayer here.

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

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