Mount Vernon NY Employee Retention Credit Eligibility

 
Can you take the employee retention credit on the salaries paid out of your S corporation to you, the 100% owner? Now, this is a huge dispute in the tax professional community today. I'm not going to hang my hat on any one position until we get more information from the IRS on this, however if I needed to lean one way or the other, I would lean in the instructions of stating that owner salaries in so far as we're discussing somebody who owns more than 50 percent of business, do not certify.
  
 
How It Functions
I do not wish to get too technical here, but Section 2301(e) of the CARES Act -- which produced the employee retention credit -- says that for functions of the employee retention credit, "guidelines comparable to the guideline of sections 51(i)( 1) and 280C(a) of the Internal Profits Code of 1986 will 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 described as the Internal Revenue Code of 1986. The vital part here is those other code sections referral.

Because that's the simple one, let's start with 280C(a). That is just saying that if you get a credit on some wages you pay in your business, you can't double dip and take a reduction for those same salaries. Now let's discuss section 51(i)( 1 ), which states, "No salaries will be taken into consideration ...

with regard to an individual who bears any of the relationships explained in subparagraphs (A) through (G) of section 152(d)( 2) to the taxpayer, or, if the taxpayer is a corporation, to a person who owns, straight or indirectly, more than 50 percent in worth of the outstanding stock of the corporation, or, if the taxpayer is an entity besides a corporation, to any person who owns, straight or indirectly, more than 50 percent of the capital and earnings interests in the entity." So let's focus on the stipulation that says "if the taxpayer is a corporation" since we're presuming an S corp taxpayer here.Let's focus on the clause that says "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.That is just saying that if you get a credit on some incomes you pay in your company, you can't double dip and take a reduction for those exact same incomes. Let's focus on the provision that states "if the taxpayer is a corporation" due to the fact that we're presuming an S corp taxpayer here.

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

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