Mount Vernon NY Employee Retention Credit Eligibility

 
Can you take the employee retention credit on the earnings paid of your S corporation to you, the 100% owner? Now, this is a huge dispute in the tax professional neighborhood today. 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 had to lean one method or the other, I would lean in the direction of stating that owner incomes in so far as we're talking about somebody who owns more than 50 percent of the service, do not qualify.
  
 
Exactly How It Works
I don't want to get too technical here, however Section 2301(e) of the CARES Act -- which developed the employee retention credit -- states that for functions of the employee retention credit, "guidelines comparable to the rule of areas 51(i)( 1) and 280C(a) of the Internal Income Code of 1986 will apply," do not get caught up on the 1986, that's simply the last time the Internal Profits Code had a major overhaul, so it's just referred to as the Internal Revenue Code of 1986. The fundamental part here is those other code areas recommendation.

Let's start with 280C(a) because that's the easy one. That is just 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 wages. Now let's discuss section 51(i)( 1 ), which says, "No wages shall be taken into account ...

with regard to an individual who bears any of the relationships described in subparagraphs (A) through (G) of area 152(d)( 2) to the taxpayer, or, if the taxpayer is a corporation, to a person 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 aside from a corporation, to any person who owns, straight or indirectly, more than 50 percent of the capital and revenues interests in the entity." So let's concentrate on the stipulation that states "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.Let's focus on the clause that states "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 incomes you pay in your organization, you can't double dip and take a deduction for those same earnings. Let's focus on the stipulation that says "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.

So this is stating that you do not take into account incomes with respect 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 salaries do not certify. Now, some tax professionals are taking a look at the employee retention credit qualified incomes FAQs on the IRS website, and they're taking a look at FAQ 59, which says, "Are salaries paid by an employer to workers who are associated individuals thought about certified incomes?

" and they're saying, "Look at the response here. It's only these loved ones whose earnings do not count. And the IRS didn't particularly say owner earnings or spouse earnings do not count here, so bad-a-boo, bad-a-bing, therefore owner salaries must 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 only these family members whose incomes do not count. The IRS website is not the tax code.