Exactly How It Functions

I don't desire to get too technical here, however Area 2301(e) of the CARES Act -- which developed the employee retention credit -- states that for purposes of the employee retention credit, "guidelines comparable to the rule of sections 51(i)( 1) and 280C(a) of the Internal Revenue Code of 1986 will apply," do not get caught up on the 1986, that's simply the last time the Internal Profits Code had a significant overhaul, so it's simply referred to as the Internal Revenue Code of 1986. The essential part here is those other code sections reference.

That is simply saying that if you get a credit on some incomes you pay in your business, you can't double dip and take a deduction for those exact same wages. Let's focus on the clause 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 take into account incomes with regard to a person who owns, straight or indirectly, more than 50 percent in value of the outstanding stock of the corporation. That seems clear to me that owner wages do not qualify. Now, some tax professionals are taking a look at the employee retention credit qualified salaries FAQs on the IRS site, and they're looking at FAQ 59, which states, "Are wages paid by a company to staff members who relate individuals considered certified incomes?

" and they're saying, "Look at the answer here. It's just these loved ones whose incomes do not count. And the IRS didn't particularly state owner earnings or partner earnings do not count here, so bad-a-boo, bad-a-bing, therefore owner earnings must count." To that, I would state, "Look. The IRS site is not the tax code.

 


 

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