Exactly How It Functions

I do not wish 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, "rules similar to the rule of sections 51(i)( 1) and 280C(a) of the Internal Earnings Code of 1986 will apply," don't get captured up on the 1986, that's just the last time the Internal Income Code had a major overhaul, so it's simply referred to as the Internal Earnings Code of 1986. The vital part here is those other code areas recommendation.

Let's begin with 280C(a) because that's the easy one. That is just stating that if you get a credit on some wages you pay in your business, you can't double dip and take a reduction for those very same earnings. Now let's talk about section 51(i)( 1 ), which states, "No earnings 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 person, directly or straight, more than 50 percent in value of worth outstanding stock impressive the corporation, or, if the taxpayer is an entity other than a corporation, to any individual who person, directly or indirectly, more than 50 percent of the capital and profits interests in the entity." So let's focus on the clause that says "if the taxpayer is a corporation" because we're presuming an S corp taxpayer here.

This is saying that you don't take into account salaries with respect to an individual who owns, straight or indirectly, more than 50 percent in value of the exceptional stock of the corporation. That appears clear to me that owner salaries do not certify. Now, some tax specialists are looking at the employee retention credit qualified earnings FAQs on the IRS site, and they're taking a look at FAQ 59, which states, "Are wages paid by an employer to employees who relate people considered certified salaries?

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

 


 

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