Mount Vernon NY Employee Retention Credit

 
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 argument in the tax professional neighborhood right now. I'm not going to hang my hat on any one position until we get more explanation from the IRS on this, but if I needed to lean one method or the other, I would lean in the direction of stating that owner salaries in so far as we're discussing someone who owns more than 50 percent of business, do not qualify.
  
 
Just how It Works
I don't desire to get too technical here, however Section 2301(e) of the CARES Act -- which developed the employee retention credit -- states that for purposes of the employee retention credit, "guidelines similar 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 just the last time the Internal Income Code had a major overhaul, so it's simply described as the Internal Profits Code of 1986. The essential part here is those other code areas referral.

Let's begin with 280C(a) because that's the easy one. That is just stating 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 very same wages. Today let's discuss area 51(i)( 1 ), which states, "No incomes will be considered ...

with respect to a person who bears any of the relationships explained in subparagraphs (A) through (G) of area 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 exceptional stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who owns, straight or indirectly, more than 50 percent of the capital and profits interests in the entity." So let's focus on the provision that says "if the taxpayer is a corporation" since we're presuming an S corp taxpayer here.Let's focus on the provision that says "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.That is just saying that if you get a credit on some earnings you pay in your organization, you can't double dip and take a deduction for those very same wages. Let's focus on the clause that says "if the taxpayer is a corporation" due to the fact that we're presuming an S corp taxpayer here.

So this is stating that you do not consider earnings with respect to a person who owns, straight or indirectly, more than 50 percent in value of the impressive stock of the corporation. This is stating that you don't take into account wages with respect to an individual who owns, directly or indirectly, more than 50 percent in value of the impressive stock of the corporation. That appears clear to me that owner incomes do not qualify. Now, some tax professionals are taking a look at the employee retention credit certified salaries FAQs on the IRS website, and they're taking a look at FAQ 59, which states, "Are earnings paid by an employer to staff members who belong individuals considered certified incomes?

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