Clarkstown NY Employee Retention Credit Taxable Income

 
Can you take the employee retention credit on the earnings paid of your S corporation to you, the 100% owner? Now, this is a big debate in the tax expert community today. I'm not going to hang my hat on any one position 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 direction of stating that owner salaries in so far as we're speaking about someone who owns more than 50 percent of business, do not qualify.
  
 
How It Functions
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 functions of the employee retention credit, "rules similar to the guideline of areas 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 will use," do not get captured up on the 1986, that's simply the last time the Internal Income Code had a major overhaul, so it's just described as the Internal Income Code of 1986. The vital part here is those other code sections reference.

Let's begin with 280C(a) since that's the simple one. That is simply saying that if you get a credit on some wages you pay in your organization, you can't double dip and take a reduction for those exact same incomes. Now let's speak about area 51(i)( 1 ), which says, "No incomes shall be considered ...

with respect to an individual who bears any of the relationships described in subparagraphs (A) through (G) of section 152(d)( 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 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 revenues interests in the entity." So let's focus on the clause 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" because we're assuming an S corp taxpayer here.That is simply saying that if you get a credit on some wages you pay in your business, you can't double dip and take a reduction for those same incomes. Let's focus on the clause that says "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.

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

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