Clay NY Employee Retention Credit

 
Can you take the employee retention credit on the earnings paid out of your S corporation to you, the 100% owner? Now, this is a big dispute in the tax expert community right now. I'm not going to hang my hat on any one position until we get more information from the IRS on this, but if I had to lean one way or the other, I would lean in the direction of saying that owner incomes in so far as we're speaking about somebody who owns more than 50 percent of the company, do not certify.
  
 
Exactly How It Works
I do not wish to get too technical here, but Section 2301(e) of the CARES Act -- which developed 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 Profits Code of 1986 will use," don't get caught up on the 1986, that's simply the last time the Internal Income Code had a significant overhaul, so it's simply referred to as the Internal Income Code of 1986. The vital part here is those other code sections referral.

Since that's the easy one, let's start with 280C(a). That is simply 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. But now let's discuss section 51(i)( 1 ), which states, "No earnings 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 a person 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 aside from a corporation, to any individual who owns, directly or indirectly, more than 50 percent of the capital and revenues interests in the entity." So let's focus on the stipulation 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 clause that says "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.That is simply stating 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 exact same salaries. Let's focus on the provision that states "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.

So this is stating that you don't consider incomes with regard to a person who owns, straight or indirectly, more than 50 percent in worth of the impressive stock of the corporation. This is saying that you do not take into account wages 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 incomes do not qualify. Now, some tax experts are taking a look at the employee retention credit certified wages FAQs on the IRS website, and they're taking a look at FAQ 59, which states, "Are wages paid by an employer to employees who relate people thought about qualified earnings?

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