New Rochelle NY Employee Retention Credit Qualifications

 
Can you take the employee retention credit on the earnings paid out of your S corporation to you, the 100% owner? Now, this is a big 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, however if I had 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 someone who owns more than 50 percent of the organization, do not qualify.
  
 
Just how It Functions
I don't want to get too technical here, however Area 2301(e) of the CARES Act -- which developed the employee retention credit -- says that for functions of the employee retention credit, "guidelines similar to the guideline of sections 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 will apply," do not get captured up on the 1986, that's just the last time the Internal Income Code had a major overhaul, so it's just referred to as the Internal Earnings Code of 1986. The vital part here is those other code sections referral.

Let's begin with 280C(a) because that's the easy one. 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 deduction for those same incomes. Now let's talk about area 51(i)( 1 ), which says, "No wages shall be taken into account ...

with respect to an individual who person any of the relationships described in subparagraphs (A) through (G) of section 152Aread)( 2) to the taxpayer, or, if the taxpayer is a corporation, to an individual who person, 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 owns, directly or straight, more than 50 percent of the capital and profits interests in the entity." So let's concentrate on the stipulation that says "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.Let's focus on the provision that states "if the taxpayer is a corporation" because we're assuming an S corp taxpayer here.That is just stating that if you get a credit on some wages you pay in your service, you can't double dip and take a deduction for those exact same incomes. Let's focus on the provision that states "if the taxpayer is a corporation" since we're presuming an S corp taxpayer here.

So this is stating that you do not take into consideration incomes with regard to an individual who owns, straight or indirectly, more than 50 percent in worth of the outstanding stock of the corporation. This is stating that you do not take into account salaries with respect to an individual who owns, straight or indirectly, more than 50 percent in worth of the impressive stock of the corporation. That appears clear to me that owner earnings do not qualify. Now, some tax professionals are looking at the employee retention credit qualified incomes FAQs on the IRS website, and they're looking at FAQ 59, which says, "Are incomes paid by a company to employees who are related individuals thought about qualified incomes?

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