Levittown NY Employee Retention Program

 
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 huge debate in the tax expert community right now. I'm not going to hang my hat on any one position until we get more clarification from the IRS on this, but if I needed to lean one method or the other, I would lean in the direction of saying that owner salaries in so far as we're talking about somebody who owns more than 50 percent of business, do not certify.
  
 
Just how It Functions
I don't desire to get too technical here, but Area 2301(e) of the CARES Act -- which created the employee retention credit -- states that for purposes of the employee retention credit, "guidelines similar to the guideline of areas 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 will apply," don't get captured up on the 1986, that's simply the last time the Internal Profits Code had a major overhaul, so it's just described as the Internal Earnings Code of 1986. The essential part here is those other code sections reference.

Since that's the simple one, let's start with 280C(a). That is simply stating that if you get a credit on some earnings you pay in your company, you can't double dip and take a deduction for those same incomes. Now let's talk about area 51(i)( 1 ), which says, "No wages 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 person, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who owns, directly or straight, more than 50 percent of the capital and profits interests earnings the entity." So let's concentrate on the provision that states "if the taxpayer is a corporation" due to the fact that we're presuming an S corp taxpayer here.Let's focus on the stipulation that says "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.That is just stating that if you get a credit on some wages you pay in your organization, you can't double dip and take a deduction for those same salaries. Let's focus on the provision that states "if the taxpayer is a corporation" since we're assuming an S corp taxpayer here.

So this is saying that you don't take into consideration wages with regard to an individual 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 respect to a person who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation. That appears clear to me that owner incomes do not certify. 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 incomes paid by a company to staff members who are related individuals thought about certified wages?

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