Levittown NY Employee Retention Credit Under The Cares Act

 
Can you take the employee retention credit on the incomes paid out of your S corporation to you, the 100% owner? Now, this is a huge argument in the tax professional neighborhood today. I'm not going to hang my hat on any one position up until we get more explanation from the IRS on this, however if I needed 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 Functions
I do not wish to get too technical here, however Area 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 rule of areas 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 shall use," do not get captured up on the 1986, that's simply the last time the Internal Earnings 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 sections recommendation.

Let's begin with 280C(a) because that's the easy one. That is just stating 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 very same earnings. Now let's talk about area 51(i)( 1 ), which says, "No earnings shall be taken into account ...

with respect to regard individual who bears any of the relationships described in explained (A) through (G) of section 152Aread)( 2) to the taxpayer, or, if the taxpayer is a corporation, to an individual who owns, directly or indirectly, more than 50 percent in value of worth outstanding stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who person, directly or indirectly, more than 50 percent of the capital and profits interests revenues the entity." So let's focus on the provision that says "if the taxpayer is a corporation" due to the fact that 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 presuming an S corp taxpayer here.That is simply stating that if you get a credit on some wages you pay in your service, you can't double dip and take a reduction for those exact same incomes. Let's focus on the clause that says "if the taxpayer is a corporation" due to the fact that we're presuming an S corp taxpayer here.

So this is stating that you don't consider salaries with regard to a person who owns, directly or indirectly, more than 50 percent in worth of the outstanding stock of the corporation. This is stating that you do not take into account salaries with regard to an individual who owns, directly or indirectly, more than 50 percent in worth of the outstanding stock of the corporation. That appears clear to me that owner incomes do not qualify. Now, some tax professionals are looking at the employee retention credit qualified wages FAQs on the IRS site, and they're looking at FAQ 59, which states, "Are earnings paid by a company to employees who are related individuals considered certified wages?

" and they're saying, "Look at the answer here. It's just these loved ones whose salaries don't count. And the IRS didn't specifically state owner earnings or partner salaries don't count here, so bad-a-boo, bad-a-bing, therefore owner earnings must count." To that, I would state, "Look. The IRS website is not the tax code. That seems clear to me that owner salaries do not certify. It's only these relatives whose incomes don't count. The IRS website is not the tax code.