New Rochelle NY Employee Retention Tax Credit 2020
Can you take the employee retention credit on the wages paid of your S corporation to you, the 100% owner? Now, this is a big dispute in the tax expert neighborhood today. I'm not going to hang my hat on any one position until we get more information 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 talking about someone who owns more than 50 percent of the business, do not qualify.
Just how It Works
I do not wish to get too technical here, however Area 2301(e) of the CARES Act -- which produced the employee retention credit -- states that for functions of the employee retention credit, "rules similar to the guideline of areas 51(i)( 1) and 280C(a) of the Internal Profits 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 significant overhaul, so it's simply described as the Internal Revenue Code of 1986. The important part here is those other code areas recommendation.
Because that's the simple one, let's begin with 280C(a). That is simply saying that if you get a credit on some incomes you pay in your service, you can't double dip and take a reduction for those very same wages. Today let's speak about section 51(i)( 1 ), which says, "No salaries shall 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, straight or indirectly, more than 50 percent in value of the outstanding stock of the corporation, or, if the taxpayer is an entity other than a corporation, to any person who owns, straight or indirectly, more than 50 percent of the capital and earnings interests in the entity." So let's concentrate on the provision that says "if the taxpayer is a corporation" due to the fact that we're presuming an S corp taxpayer here.Let's focus on the clause 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 incomes you pay in your organization, you can't double dip and take a reduction for those very same wages. Let's focus on the clause 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 salaries with respect to a person who owns, directly or indirectly, more than 50 percent in worth of the impressive stock of the corporation. This is stating that you do not take into account wages with regard to an individual who owns, straight or indirectly, more than 50 percent in value of the exceptional stock of the corporation. That seems clear to me that owner wages do not certify. Now, some tax professionals are taking a look at the employee retention credit certified earnings FAQs on the IRS website, and they're looking at FAQ 59, which states, "Are salaries paid by an employer to workers who are related individuals thought about certified incomes?
" and they're stating, "Look at the answer here. It's only these relatives whose salaries do not count. And the IRS didn't specifically say owner salaries or partner earnings don't count here, so bad-a-boo, bad-a-bing, for that reason owner earnings need to count." To that, I would say, "Look. The IRS website is not the tax code. That appears clear to me that owner wages do not certify. It's only these relatives whose earnings don't count. The IRS site is not the tax code.
