How It Works

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, "rules comparable to the rule of sections 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 shall 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 described as the Internal Income Code of 1986. The fundamental part here is those other code areas referral.

Let's begin with 280C(a) since that's the easy one. That is simply saying that if you get a credit on some salaries you pay in your business, you can't double dip and take a reduction for those same incomes. Now let's speak about area 51(i)( 1 ), which says, "No salaries will be taken into consideration ...

with regard to an individual who bears any of the relationships explained in subparagraphs (A) through (G) of section 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 exceptional stock of the corporation, or, if the taxpayer is an entity aside from a corporation, to any individual who owns, directly or indirectly, more than 50 percent of the capital and revenues interests in the entity." So let's focus on the provision that says "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.

That seems clear to me that owner wages do not certify. It's just these loved ones whose incomes don't count. The IRS website is not the tax code.

 


 

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