Orangetown NY Employee Retention Credit Under The Cares Act

 
Can you take the employee retention credit on the incomes paid of your S corporation to you, the 100% owner? Now, this is a big debate in the tax expert community today. I'm not going to hang my hat on any one position till we get more clarification from the IRS on this, however if I needed to lean one way or the other, I would lean in the instructions of saying that owner wages in so far as we're talking about someone who owns more than 50 percent of business, do not certify.
  
 
Just how It Functions
I do not want to get too technical here, but Area 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 sections 51(i)( 1) and 280C(a) of the Internal Revenue Code of 1986 will apply," don't get caught up on the 1986, that's just the last time the Internal Revenue Code had a significant overhaul, so it's simply described as the Internal Earnings Code of 1986. The important part here is those other code sections reference.

Let's start with 280C(a) because that's the simple 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 deduction for those exact same earnings. Now let's talk about area 51(i)( 1 ), which says, "No salaries will be taken into account ...

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

So this is saying that you don't take into account incomes with respect to an individual who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation. This is saying 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 exceptional stock of the corporation. That seems clear to me that owner salaries do not qualify. Now, some tax experts 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 says, "Are earnings paid by an employer to employees who are associated people considered certified wages?

" and they're saying, "Look at the response here. It's only these family members whose incomes don't count. And the IRS didn't particularly say owner salaries or partner earnings don't count here, so bad-a-boo, bad-a-bing, therefore owner incomes should count." To that, I would state, "Look. The IRS website is not the tax code. That appears clear to me that owner earnings do not certify. It's only these relatives whose incomes do not count. The IRS website is not the tax code.