How It Works

I do not wish to get too technical here, but Area 2301(e) of the CARES Act -- which developed the employee retention credit -- says that for functions of the employee retention credit, "guidelines similar to the guideline of sections 51(i)( 1) and 280C(a) of the Internal Income Code of 1986 shall apply," don't get captured up on the 1986, that's just the last time the Internal Revenue Code had a major overhaul, so it's just referred to as the Internal Earnings Code of 1986. The crucial part here is those other code areas reference.

Since that's the easy one, let's begin with 280C(a). 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 deduction for those exact same earnings. But now let's discuss area 51(i)( 1 ), which states, "No salaries shall be considered ...

with regard to an individual who bears any of the relationships explained in subparagraphs (A) through (G) of section 152(d)( 2) to the taxpayer, or, if the taxpayer is a corporation, to a person who owns, directly or indirectly, more than 50 percent in worth of the impressive stock of the corporation, or, if the taxpayer is an entity besides a corporation, to any individual who owns, directly or indirectly, more than 50 percent of the capital and earnings interests in the entity." So let's concentrate on the clause that states "if the taxpayer is a corporation" due to the fact that we're presuming an S corp taxpayer here.

That seems clear to me that owner earnings do not certify. It's only these relatives whose earnings don't count. The IRS website is not the tax code.

 


 

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