Irondequoit NY Employee Retention Credit Taxable Income

 
Can you take the employee retention credit on the wages paid out of your S corporation to you, the 100% owner? Now, this is a big debate in the tax expert community right now. I'm not going to hang my hat on any one position till we get more information from the IRS on this, however if I had to lean one way or the other, I would lean in the instructions of saying that owner incomes in so far as we're discussing somebody who owns more than 50 percent of business, do not qualify.
  
 
Just how It Works
I do not wish to get too technical here, but Section 2301(e) of the CARES Act -- which created the employee retention credit -- says that for functions of the employee retention credit, "guidelines comparable to the guideline of areas 51(i)( 1) and 280C(a) of the Internal Income Code of 1986 shall apply," do not get caught up on the 1986, that's just the last time the Internal Profits Code had a significant overhaul, so it's simply described as the Internal Revenue Code of 1986. The essential part here is those other code areas recommendation.

Since that's the easy one, let's start with 280C(a). That is just stating that if you get a credit on some earnings you pay in your business, you can't double dip and take a reduction for those exact same salaries. And now let's talk about section 51(i)( 1 ), which states, "No salaries will be taken into account ...

with respect to an individual who bears 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 owns, straight or indirectly, more than 50 percent in value of the impressive stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any person who owns, directly or indirectly, more than 50 percent of the capital and revenues interests in the entity." So let's focus on the provision that states "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.Let's focus on the provision that says "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.That is just saying 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 incomes. Let's focus on the provision 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 do not take into consideration wages with regard to an individual who owns, directly or indirectly, more than 50 percent in worth of the impressive stock of the corporation. This is stating that you don't take into account salaries with regard to an individual who owns, straight or indirectly, more than 50 percent in worth of the impressive stock of the corporation. That appears clear to me that owner incomes do not qualify. Now, some tax professionals are taking a look at the employee retention credit qualified earnings FAQs on the IRS website, and they're looking at FAQ 59, which says, "Are wages paid by an employer to employees who relate individuals thought about certified earnings?

" and they're stating, "Look at the answer here. It's just these relatives whose salaries do not count. And the IRS didn't particularly say owner earnings or partner earnings do not count here, so bad-a-boo, bad-a-bing, for that reason owner earnings should count." To that, I would state, "Look. The IRS site is not the tax code. That seems clear to me that owner earnings do not qualify. It's only these relatives whose wages do not count. The IRS site is not the tax code.