Forest Hills NY Employee Retention Program

 
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 professional community right now. I'm not going to hang my hat on any one position up until we get more clarification from the IRS on this, however if I needed to lean one way or the other, I would lean in the instructions of stating that owner incomes in so far as we're speaking about somebody who owns more than 50 percent of the business, do not qualify.
  
 
Exactly How It Functions
I do not desire to get too technical here, but Area 2301(e) of the CARES Act -- which created the employee retention credit -- states that for functions of the employee retention credit, "rules comparable to the guideline of sections 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 will apply," do not get captured up on the 1986, that's just the last time the Internal Revenue Code had a significant overhaul, so it's simply described as the Internal Earnings Code of 1986. The vital part here is those other code areas 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 incomes you pay in your service, you can't double dip and take a reduction for those same wages. Now let's talk about section 51(i)( 1 ), which states, "No earnings 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 person, directly or straight, more than 50 percent in value of worth outstanding stock of 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 concentrate on the stipulation that states "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.Let's focus on the clause that states "if the taxpayer is a corporation" since we're assuming an S corp taxpayer here.That is simply stating that if you get a credit on some earnings you pay in your business, you can't double dip and take a deduction for those same wages. Let's focus on the stipulation that says "if the taxpayer is a corporation" due to the fact that we're presuming an S corp taxpayer here.

So this is saying that you do not consider incomes with respect to an individual who owns, straight or indirectly, more than 50 percent in worth of the outstanding stock of the corporation. This is saying that you don't take into account incomes with regard to an individual 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 earnings do not qualify. Now, some tax specialists are taking a look at the employee retention credit certified incomes FAQs on the IRS site, and they're taking a look at FAQ 59, which says, "Are earnings paid by an employer to workers who belong people thought about qualified salaries?

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