Hempstead NY Employee Retention Tax Credit 2020

 
Can you take the employee retention credit on the earnings paid of your S corporation to you, the 100% owner? Now, this is a huge dispute in the tax professional neighborhood right now. I'm not going to hang my hat on any one position till we get more clarification from the IRS on this, however if I needed to lean one way or the other, I would lean in the direction of saying that owner salaries in so far as we're speaking about somebody who owns more than 50 percent of business, do not qualify.
  
 
Just how It Works
I don't wish to get too technical here, however Area 2301(e) of the CARES Act -- which produced the employee retention credit -- says 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 will use," don't get caught up on the 1986, that's just the last time the Internal Income Code had a major overhaul, so it's simply described as the Internal Revenue Code of 1986. The important part here is those other code areas recommendation.

Let's start with 280C(a) since that's the easy 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 salaries. Now let's speak about area 51(i)( 1 ), which says, "No wages shall be taken into account ...

with respect to a person who bears any of the relationships described in subparagraphs (A) through (G) of area 152(d)( 2) to the taxpayer, or, if the taxpayer is a corporation, to a person who owns, straight or indirectly, more than 50 percent in worth of the exceptional stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any person 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 states "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.Let's focus on the clause that says "if the taxpayer is a corporation" since we're presuming an S corp taxpayer here.That is just stating that if you get a credit on some salaries you pay in your company, you can't double dip and take a reduction for those very same wages. Let's focus on the clause that says "if the taxpayer is a corporation" since we're presuming an S corp taxpayer here.

So this is saying that you do not consider salaries with regard to a person who owns, straight or indirectly, more than 50 percent in value of the outstanding stock of the corporation. This is stating that you don't take into account salaries with regard to an individual who owns, directly or indirectly, more than 50 percent in value of the impressive stock of the corporation. That appears clear to me that owner salaries do not certify. Now, some tax professionals are taking a look at the employee retention credit certified incomes FAQs on the IRS website, and they're taking a look at FAQ 59, which says, "Are earnings paid by an employer to workers who relate people considered qualified 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 specifically say owner salaries or spouse incomes do not count here, so bad-a-boo, bad-a-bing, for that reason owner incomes should 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 only these relatives whose incomes do not count. The IRS site is not the tax code.