Exactly How It Works

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 functions of the employee retention credit, "rules comparable to the rule of areas 51(i)( 1) and 280C(a) of the Internal Income Code of 1986 will use," do not get caught up on the 1986, that's simply the last time the Internal Income Code had a major overhaul, so it's simply described as the Internal Earnings Code of 1986. The fundamental part here is those other code sections reference.

Since that's the easy one, let's start with 280C(a). That is simply saying that if you get a credit on some wages 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 says, "No incomes will be taken into account ...

with respect to an 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 straight, more than 50 percent in value of the 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 revenues the entity." So let's focus on the clause that states "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.

So this is stating that you don't take into account wages with regard to a person who owns, straight or indirectly, more than 50 percent in value of the impressive stock of the corporation. That seems clear to me that owner wages do not certify. Now, some tax specialists 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 incomes paid by a company to employees who are related people thought about certified incomes?

" and they're stating, "Look at the answer here. It's just these relatives whose salaries do not count. And the IRS didn't specifically say owner salaries or partner incomes don't count here, so bad-a-boo, bad-a-bing, for that reason owner salaries need to count." To that, I would state, "Look. The IRS website is not the tax code.

 


 

Related Posts