Forest Hills NY Employee Retention Qualifications

 
Can you take the employee retention credit on the wages paid of your S corporation to you, the 100% owner? Now, this is a big dispute in the tax professional 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, but if I had to lean one method or the other, I would lean in the instructions of saying that owner incomes in so far as we're discussing somebody who owns more than 50 percent of the company, do not certify.
  
 
Just how It Functions
I do not desire to get too technical here, but Section 2301(e) of the CARES Act -- which developed the employee retention credit -- states that for purposes of the employee retention credit, "rules similar to the guideline of areas 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 shall use," do not get captured up on the 1986, that's simply the last time the Internal Profits Code had a major overhaul, so it's simply described as the Internal Earnings Code of 1986. The vital part here is those other code sections reference.

Let's begin with 280C(a) because that's the easy one. 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 very same earnings. However now let's discuss area 51(i)( 1 ), which says, "No salaries will be taken into account ...

with regard to an individual who bears any of the relationships explained in subparagraphs (A) through (G) of area 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 value of the exceptional stock of the corporation, or, if the taxpayer is an entity aside from a corporation, to any individual who owns, straight or indirectly, more than 50 percent of the capital and revenues interests in the entity." So let's focus on the clause 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" due to the fact that we're assuming an S corp taxpayer here.That is just saying 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 same earnings. 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.

So this is stating that you don't take into consideration wages with regard to an individual who owns, directly or indirectly, more than 50 percent in value of the exceptional stock of the corporation. This is stating that you do not take into account wages with regard to a person who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation. That appears clear to me that owner incomes do not qualify. Now, some tax specialists are taking a look at the employee retention credit qualified earnings FAQs on the IRS site, and they're looking at FAQ 59, which states, "Are wages paid by an employer to employees who relate people thought about qualified incomes?

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