Forest Hills NY Employee Retention Tax Credit

 
Can you take the employee retention credit on the wages paid 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 up until we get more clarification from the IRS on this, however if I had to lean one method or the other, I would lean in the instructions of stating that owner wages in so far as we're talking about someone who owns more than 50 percent of business, do not qualify.
  
 
Exactly How It Works
I don't desire to get too technical here, however Area 2301(e) of the CARES Act -- which created the employee retention credit -- says that for purposes of the employee retention credit, "guidelines comparable to the rule of sections 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 shall apply," do not get caught up on the 1986, that's simply the last time the Internal Profits Code had a major overhaul, so it's just referred to as the Internal Income Code of 1986. The vital part here is those other code sections recommendation.

Let's begin with 280C(a) because that's the simple one. 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 reduction for those same incomes. Now let's talk about section 51(i)( 1 ), which says, "No wages will 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 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 focus on the provision that states "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.Let's focus on the provision 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 service, you can't double dip and take a deduction for those exact same wages. Let's focus on the clause that says "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 wages with respect to an individual 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 incomes with respect to a person who owns, straight or indirectly, more than 50 percent in value of the exceptional stock of the corporation. That seems clear to me that owner salaries do not qualify. Now, some tax professionals are taking a look at the employee retention credit certified earnings FAQs on the IRS site, and they're taking a look at FAQ 59, which states, "Are wages paid by a company to employees who are related individuals considered certified salaries?

" and they're saying, "Look at the answer here. It's only these loved ones whose salaries do not count. And the IRS didn't particularly say owner earnings or partner salaries don't count here, so bad-a-boo, bad-a-bing, therefore owner earnings need to 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 incomes don't count. The IRS site is not the tax code.