Forest Hills NY Employee Retention Credit

 
Can you take the employee retention credit on the wages paid out of your S corporation to you, the 100% owner? Now, this is a huge argument in the tax expert neighborhood right now. 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 had to lean one way or the other, I would lean in the instructions of stating that owner incomes in so far as we're discussing somebody who owns more than 50 percent of the company, do not qualify.
  
 
Exactly How It Functions
I don't want to get too technical here, however Section 2301(e) of the CARES Act -- which produced the employee retention credit -- says that for purposes of the employee retention credit, "guidelines comparable to the guideline of sections 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 will apply," don't get captured up on the 1986, that's just the last time the Internal Profits Code had a significant overhaul, so it's just referred to as the Internal Profits Code of 1986. The fundamental part here is those other code sections reference.

Since that's the simple one, let's start with 280C(a). That is just saying that if you get a credit on some salaries you pay in your organization, you can't double dip and take a deduction for those same earnings. Now let's talk about area 51(i)( 1 ), which says, "No salaries shall be taken into account ...

with respect to regard individual who person any of the relationships described in explained (A) through (G) of section 152Aread)( 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 impressive the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who owns, directly or indirectly, more than 50 percent of the capital and profits interests in the entity." So let's focus on the provision that says "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.Let's focus on the clause that states "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.That is simply stating that if you get a credit on some incomes you pay in your company, 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" since we're assuming an S corp taxpayer here.

So this is saying that you don't take into consideration wages with regard to an individual who owns, straight or indirectly, more than 50 percent in worth of the impressive stock of the corporation. This is stating that you don't take into account salaries with respect to an individual who owns, straight 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 certify. Now, some tax specialists are taking a look at the employee retention credit qualified wages FAQs on the IRS website, and they're looking at FAQ 59, which states, "Are incomes paid by a company to staff members who are related individuals considered certified incomes?

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