Mott Haven NY Employee Retention Credit Taxable Income

 
Can you take the employee retention credit on the salaries paid 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 till we get more information from the IRS on this, but if I had to lean one way or the other, I would lean in the direction of stating that owner wages in so far as we're talking about somebody who owns more than 50 percent of the business, do not certify.
  
 
Exactly How It Works
I don't wish to get too technical here, however Section 2301(e) of the CARES Act -- which produced the employee retention credit -- states that for functions of the employee retention credit, "guidelines comparable to the rule of sections 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 Income Code had a major overhaul, so it's just described as the Internal Revenue Code of 1986. The essential part here is those other code areas reference.

Since that's the easy one, let's begin with 280C(a). That is simply 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 salaries. Today let's speak about section 51(i)( 1 ), which states, "No wages shall be taken into account ...

with respect to a person who bears any of the relationships explained in subparagraphs (A) through (G) of area 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 individual who owns, straight or indirectly, more than 50 percent of the capital and profits interests in the entity." So let's concentrate 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 clause that says "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.That is simply 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 same wages. Let's focus on the provision that states "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.

So this is stating that you do not take into consideration salaries with regard to a person who owns, directly or indirectly, more than 50 percent in worth of the impressive stock of the corporation. This is stating that you do not take into account incomes with regard to a person who owns, straight or indirectly, more than 50 percent in worth of the outstanding stock of the corporation. That seems clear to me that owner salaries do not qualify. Now, some tax professionals are taking a look at the employee retention credit certified earnings FAQs on the IRS website, and they're taking a look at FAQ 59, which states, "Are incomes paid by an employer to employees who relate people considered qualified incomes?

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