How It Functions

I don't wish to get too technical here, however Section 2301(e) of the CARES Act -- which produced the employee retention credit -- states that for functions of the employee retention credit, "guidelines similar to the guideline of areas 51(i)( 1) and 280C(a) of the Internal Profits Code of 1986 shall use," do not get captured up on the 1986, that's just the last time the Internal Profits Code had a significant overhaul, so it's just described as the Internal Earnings Code of 1986. The essential part here is those other code areas recommendation.

Let's start with 280C(a) because that's the simple one. That is simply saying that if you get a credit on some salaries you pay in your company, you can't double dip and take a reduction for those very same wages. Now let's talk about section 51(i)( 1 ), which says, "No incomes will be taken into account ...

with respect to regard individual who bears 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 of 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 states "if the taxpayer is a corporation" since we're presuming an S corp taxpayer here.

So this is saying that you do not take into account incomes with regard to a person who owns, straight or indirectly, more than 50 percent in worth of the exceptional stock of the corporation. That appears clear to me that owner salaries do not certify. Now, some tax professionals are taking a look at the employee retention credit certified salaries FAQs on the IRS site, and they're looking at FAQ 59, which states, "Are incomes paid by a company to workers who are associated people thought about certified incomes?

" and they're stating, "Look at the response here. It's just these loved ones whose incomes don't count. And the IRS didn't particularly state owner wages or spouse incomes do not count here, so bad-a-boo, bad-a-bing, therefore owner earnings must count." To that, I would say, "Look. The IRS site is not the tax code.

 


 

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