Exactly How It Works

I do not wish to get too technical here, but Section 2301(e) of the CARES Act -- which created the employee retention credit -- says that for purposes of the employee retention credit, "guidelines similar to the rule of areas 51(i)( 1) and 280C(a) of the Internal Revenue 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 major overhaul, so it's simply referred to as the Internal Revenue Code of 1986. The fundamental part here is those other code areas referral.

Since that's the simple one, let's begin with 280C(a). That is simply stating that if you get a credit on some wages you pay in your service, you can't double dip and take a deduction for those exact same salaries. Now let's talk about area 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 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 the outstanding stock impressive 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 in the entity." So let's concentrate on the clause that states "if the taxpayer is a corporation" due to the fact that we're assuming an S corp taxpayer here.

That appears clear to me that owner incomes do not qualify. It's just these family members whose incomes do not count. The IRS website is not the tax code.

 


 

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