Mount Vernon NY Employee Retention Credit Under The Cares Act

 
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 expert neighborhood today. I'm not going to hang my hat on any one position until we get more explanation from the IRS on this, however if I had to lean one way or the other, I would lean in the direction of saying that owner wages in so far as we're speaking about somebody who owns more than 50 percent of the business, do not qualify.
  
 
Exactly How It Functions
I don't wish to get too technical here, however Section 2301(e) of the CARES Act -- which developed 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 Revenue Code of 1986 will apply," don't get captured up on the 1986, that's just the last time the Internal Profits Code had a major overhaul, so it's just referred to as the Internal Profits Code of 1986. The important part here is those other code areas reference.

Let's start with 280C(a) since that's the simple one. That is just saying 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 exact same salaries. Now let's talk about section 51(i)( 1 ), which states, "No incomes shall be taken into account ...

with respect to an individual who person any of the relationships described in explained (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 worth outstanding stock impressive the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who person, directly or indirectly, more than 50 percent of the capital and profits interests earnings the entity." So let's concentrate on the provision that states "if the taxpayer is a corporation" due to the fact that we're presuming an S corp taxpayer here.Let's focus on the provision that says "if the taxpayer is a corporation" since we're presuming an S corp taxpayer here.That is simply 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 same earnings. 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 regard to a person who owns, directly or indirectly, more than 50 percent in value of the exceptional stock of the corporation. This is saying that you don't take into account salaries with respect to a person who owns, directly or indirectly, more than 50 percent in worth of the impressive stock of the corporation. That appears clear to me that owner wages do not certify. Now, some tax specialists are looking at the employee retention credit qualified wages FAQs on the IRS site, and they're looking at FAQ 59, which states, "Are earnings paid by a company to employees who belong people considered certified incomes?

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