Exactly How It Works

I don't desire to get too technical here, however Section 2301(e) of the CARES Act -- which created the employee retention credit -- says that for purposes of the employee retention credit, "guidelines similar to the rule of sections 51(i)( 1) and 280C(a) of the Internal Profits Code of 1986 shall use," do not get captured up on the 1986, that's just the last time the Internal Income Code had a major overhaul, so it's simply referred to as the Internal Revenue Code of 1986. The fundamental part here is those other code areas reference.

That is simply 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 incomes. 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 an individual who owns, directly or indirectly, more than 50 percent in worth of the exceptional stock of the corporation. That appears clear to me that owner incomes do not qualify. Now, some tax specialists are looking at the employee retention credit qualified salaries FAQs on the IRS website, and they're looking at FAQ 59, which states, "Are salaries paid by an employer to staff members who relate people thought about certified wages?

" and they're stating, "Look at the response here. It's just these loved ones whose salaries do not count. And the IRS didn't specifically say owner incomes or partner earnings don't count here, so bad-a-boo, bad-a-bing, therefore owner salaries must count." To that, I would state, "Look. The IRS website is not the tax code.

 


 

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