How It Functions

I don't wish to get too technical here, but Section 2301(e) of the CARES Act -- which created the employee retention credit -- says that for purposes of the employee retention credit, "guidelines similar to the guideline of areas 51(i)( 1) and 280C(a) of the Internal Profits Code of 1986 shall use," do not get caught up on the 1986, that's just the last time the Internal Income Code had a major overhaul, so it's simply referred to as the Internal Earnings Code of 1986. The fundamental part here is those other code areas recommendation.

Since that's the simple one, let's begin with 280C(a). That is simply saying that if you get a credit on some salaries you pay in your service, you can't double dip and take a reduction for those exact same earnings. Now let's talk about section 51(i)( 1 ), which states, "No incomes will be taken into account ...

with respect to regard individual who bears any of the relationships described in subparagraphs (A) through (G) of section 152Aread)( 2) to the taxpayer, or, if the taxpayer is a corporation, to an individual who owns, directly or straight, 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 person, directly or straight, more than 50 percent of the capital and profits interests revenues the entity." So let's concentrate on the clause that says "if the taxpayer is a corporation" since we're assuming an S corp taxpayer here.

That seems clear to me that owner incomes do not qualify. It's just these family members whose earnings don't count. The IRS site is not the tax code.

 


 

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