Clarkstown NY Employee Retention Tax Credit 2021

 
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 neighborhood today. I'm not going to hang my hat on any one position until we get more clarification from the IRS on this, but if I had to lean one way or the other, I would lean in the instructions 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 don't desire to get too technical here, but Section 2301(e) of the CARES Act -- which produced the employee retention credit -- says that for functions of the employee retention credit, "rules comparable to the guideline of sections 51(i)( 1) and 280C(a) of the Internal Income Code of 1986 will use," don't get caught up on the 1986, that's just the last time the Internal Earnings Code had a major overhaul, so it's simply described as the Internal Profits Code of 1986. The fundamental part here is those other code sections recommendation.

Since that's the simple one, let's begin with 280C(a). That is simply saying that if you get a credit on some wages you pay in your company, you can't double dip and take a reduction for those same earnings. Now let's talk about section 51(i)( 1 ), which states, "No wages shall be taken into consideration ...

with regard to a person 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 an individual who owns, directly or indirectly, more than 50 percent in worth of the exceptional stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who owns, straight or indirectly, more than 50 percent of the capital and profits interests in the entity." So let's focus on the stipulation that says "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.Let's focus on the stipulation that says "if the taxpayer is a corporation" since we're presuming an S corp taxpayer here.That is just 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 same incomes. Let's focus on the clause that states "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 account incomes 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 saying that you don't take into account incomes with regard to a person who owns, directly or indirectly, more than 50 percent in worth of the exceptional stock of the corporation. That seems clear to me that owner wages do not qualify. Now, some tax specialists are looking at the employee retention credit certified wages FAQs on the IRS website, and they're taking a look at FAQ 59, which states, "Are salaries paid by a company to employees who relate individuals thought about certified wages?

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