Exactly How It Works

I do not wish to get too technical here, but Area 2301(e) of the CARES Act -- which created the employee retention credit -- says that for purposes of the employee retention credit, "rules comparable to the guideline of areas 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 will apply," do not get caught up on the 1986, that's simply the last time the Internal Revenue Code had a major overhaul, so it's just referred to as the Internal Income Code of 1986. The fundamental part here is those other code sections referral.

That is simply stating that if you get a credit on some salaries you pay in your company, you can't double dip and take a deduction for those exact same incomes. Let's focus on the stipulation that says "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.

So this is stating that you don't take into account earnings with regard to a person who owns, straight or indirectly, more than 50 percent in value of the exceptional stock of the corporation. That appears clear to me that owner incomes do not qualify. Now, some tax experts are looking at the employee retention credit certified wages FAQs on the IRS website, and they're taking a look at FAQ 59, which says, "Are salaries paid by a company to workers who relate people thought about certified wages?

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

 


 

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