How It Functions

I don't desire to get too technical here, however Area 2301(e) of the CARES Act -- which created the employee retention credit -- says that for purposes of the employee retention credit, "guidelines comparable to the guideline of sections 51(i)( 1) and 280C(a) of the Internal Profits Code of 1986 shall use," don't get caught up on the 1986, that's simply the last time the Internal Profits Code had a significant overhaul, so it's just referred to as the Internal Revenue Code of 1986. The essential part here is those other code areas recommendation.

Let's begin with 280C(a) since that's the simple one. 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 deduction for those exact same wages. Now let's talk about section 51(i)( 1 ), which says, "No wages will be taken into account ...

with respect to an 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 owns, directly or straight, more than 50 percent in value of worth outstanding stock exceptional 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." Let's focus on the clause that says "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.

That appears clear to me that owner salaries do not qualify. It's just these loved ones whose earnings do not count. The IRS website is not the tax code.

 


 

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