Exactly How It Works

I do not wish to get too technical here, however Section 2301(e) of the CARES Act -- which developed the employee retention credit -- says that for purposes of the employee retention credit, "rules comparable to the rule of areas 51(i)( 1) and 280C(a) of the Internal Income Code of 1986 shall apply," don't get caught up on the 1986, that's simply the last time the Internal Profits Code had a significant overhaul, so it's just described as the Internal Revenue Code of 1986. The vital part here is those other code areas reference.

Let's start with 280C(a) because that's the simple one. That is just stating that if you get a credit on some salaries you pay in your service, you can't double dip and take a deduction for those very same incomes. Now let's talk about area 51(i)( 1 ), which states, "No salaries shall be taken into account ...

with respect to an individual who person any of the relationships described in subparagraphs (A) through (G) of section 152(d)( 2) to the taxpayer, or, if the taxpayer is a corporation, to an individual who person, directly or indirectly, more than 50 percent in value of the outstanding stock impressive 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 revenues the entity." Let's focus on the clause that states "if the taxpayer is a corporation" due to the fact that we're presuming an S corp taxpayer here.

So this is saying that you don't consider earnings with regard to a person who owns, straight 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 qualify. Now, some tax specialists are looking at the employee retention credit qualified earnings FAQs on the IRS website, and they're looking at FAQ 59, which says, "Are earnings paid by a company to employees who belong people considered certified incomes?

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

 


 

Related Posts