Clay NY Employee Retention Credit Under The Cares Act

 
Can you take the employee retention credit on the incomes paid out of your S corporation to you, the 100% owner? Now, this is a big debate in the tax professional neighborhood today. I'm not going to hang my hat on any one position till 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 saying that owner incomes in so far as we're talking about somebody who owns more than 50 percent of business, do not qualify.
  
 
Exactly How It Works
I don't want to get too technical here, however Area 2301(e) of the CARES Act -- which created the employee retention credit -- says that for functions of the employee retention credit, "guidelines similar to the rule of areas 51(i)( 1) and 280C(a) of the Internal Revenue Code of 1986 will apply," do not get caught up on the 1986, that's just the last time the Internal Revenue Code had a significant overhaul, so it's simply referred to as the Internal Earnings Code of 1986. The fundamental part here is those other code sections reference.

Let's begin with 280C(a) because that's the simple one. That is simply stating that if you get a credit on some incomes you pay in your service, you can't double dip and take a reduction for those same salaries. Now let's talk about section 51(i)( 1 ), which states, "No salaries will be taken into account ...

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 straight, more than 50 percent in value of worth outstanding stock exceptional the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who person, directly or straight, more than 50 percent of the capital and profits interests revenues the entity." So let's concentrate on the provision that states "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.Let's focus on the provision that states "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.That is just stating that if you get a credit on some earnings you pay in your organization, you can't double dip and take a reduction for those exact same wages. Let's focus on the clause 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 don't take into account salaries with respect to a person who owns, straight or indirectly, more than 50 percent in value of the outstanding stock of the corporation. This is saying that you don't take into account salaries with respect to a person who owns, directly or indirectly, more than 50 percent in worth of the outstanding stock of the corporation. That seems clear to me that owner incomes do not qualify. Now, some tax specialists 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 states, "Are salaries paid by a company to staff members who belong people considered certified earnings?

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