Mount Vernon NY Employee Retention Credit 2020

 
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 dispute in the tax professional neighborhood right now. I'm not going to hang my hat on any one position up until we get more explanation from the IRS on this, but 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 talking about somebody who owns more than 50 percent of business, do not certify.
  
 
Just how It Works
I do not wish 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, "rules similar to the rule of sections 51(i)( 1) and 280C(a) of the Internal Revenue Code of 1986 will use," don't get caught up on the 1986, that's simply the last time the Internal Income Code had a significant overhaul, so it's simply referred to as the Internal Income Code of 1986. The important part here is those other code sections referral.

Let's start with 280C(a) because that's the easy one. That is simply stating that if you get a credit on some wages you pay in your company, you can't double dip and take a reduction for those same salaries. Now let's talk about section 51(i)( 1 ), which states, "No wages shall be taken into account ...

with respect to regard 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, 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 revenues the entity." So let's focus on the provision that states "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" since we're assuming an S corp taxpayer here.That is just saying 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 very same wages. Let's focus on the provision that states "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.

So this is saying that you don't consider incomes with respect 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 do not take into account earnings with respect to a person who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation. That seems clear to me that owner wages do not certify. Now, some tax experts are taking a look at the employee retention credit certified wages FAQs on the IRS site, and they're looking at FAQ 59, which states, "Are salaries paid by a company to workers who belong individuals considered certified incomes?

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