Employee Retention Credit & Owners

[G2R]

Has anyone seen confirmation that owners are eligible for ERC?  A bunch of my S-Corps are single owner corps and I haven't seen any guidance from the IRS that owners are definitely eligible.  Only that relatives of owners are not.  As I'm filing Q1 941s (and looking over 2020's previously filed 941s that were PPP borrowers) it's a lot of potential money for most of them.  

[Lion EA]

National speakers disagree on this. Pick your side.

[Lee B]

Copied from the IRS FAQs:

"59. Are wages paid by an employer to employees who are related individuals considered qualified wages?

No. Wages paid to related individuals, as defined by section 51(i)(1) of the Internal Revenue Code (the "Code"), are not taken into account for purposes of the Employee Retention Credit. A related individual is any employee who has of any of the following relationships to the employee's employer who is an individual:

A child or a descendant of a child;

A brother, sister, stepbrother, or stepsister;

The father or mother, or an ancestor of either;

A stepfather or stepmother;

A niece or nephew;

An aunt or uncle;

A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

In addition, if the Eligible Employer is a corporation, then a related individual is any person that bears a relationship described above with an individual owning, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation.

If the Eligible Employer is an entity other than a corporation, then a related individual is any person that bears a relationship described above with an individual owning, directly or indirectly, more than 50 percent of the capital and profits interests in the entity.

If the Eligible Employer is an estate or trust, then a related individual includes a grantor, beneficiary, or fiduciary of the estate or trust, or any person that bears a relationship described above with an individual who is a grantor, beneficiary, or fiduciary of the estate or true."

 

If related  individuals do not qualify, I think we should assume that owners don't qualify.

In addition,  if you look deeper into the FAQs regarding what constitutes qualifying wages and what doesn't,

I really don't see how wages paid to an owner would meet the definition of qualifying wages.

would ever qualify.

[Lion EA]

OK, so NOT the owner? And, NOT his/her kids. But spouse is not mentioned in the above list. So, the spouse's wages DO qualify? The only family member who does qualify? Even if spouse owns 5% of the company, right?

[Lee B]

5 minutes ago, Lion EA said:

OK, so NOT the owner? And, NOT his/her kids. But spouse is not mentioned in the above list. So, the spouse's wages DO qualify? The only family member who does qualify? Even if spouse owns 5% of the company, right?

I really don't think so. That wouldn't pass the smell test! As rushed and swamped as the IRS has been, we have all seen details repeatedly omitted, reversed,

confused, or . . . . . . . . .!  Just because a spouse isn't on that list, it's still fairly clear who doesn't qualify. In addition, if you look at the FAQs regarding what

constitutes qualifying wages, I don't see how a spouse jumps thorough those hoops.

[BulldogTom]

On 4/19/2021 at 10:42 AM, cbslee said:

I really don't think so. That wouldn't pass the smell test! As rushed and swamped as the IRS has been, we have all seen details repeatedly omitted, reversed,

confused, or . . . . . . . . .!  Just because a spouse isn't on that list, it's still fairly clear who doesn't qualify. In addition, if you look at the FAQs regarding what

constitutes qualifying wages, I don't see how a spouse jumps thorough those hoops.

I am thinking that the omission of Spouse wages was not an oversight, but an intentional writing of the law.   I think the bona fide wages paid for the employment services of a spouse might qualify.   They have had some time to correct this language and have not.   

Has anyone gotten further with this in a CPE class or some type of authoritative pronouncements from the IRS?

Tom 
Sparks, NV

[Lee B]

Here is a copy of a letter from the AICPA to the IRS asking for clarification to which the IRS has yet to respond:

https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/56175896-aicpa-comments-erc-2-25-21.pdf

[Lee B]

Please follow the link TexTaxToo posted re 2021-49 for detailed analysis.

[Lion EA]

Just saw a FREE book on Amazon mentioned on Twitter: 

Stephen L Nelson CPA @SeattleCPA

3hAmazon is giving away thru Kindle Unlimited free copies my "Maximizing Employee Retention Credits" book. Not sure how long that lasts but here's link:

https://amazon.com/dp/B09CNRXMPR/ref=sr_1_3?dchild=1&keywords=maximizing+employee+retention+credits&qid=1629037968&sr=8-3…

PS Acknowledgements page thanks

@danchodan

@edzollars

@nittiaj

for ways they helped us all learn ERC.

Maximizing Employee Retention Credits: Qualifying for, Claiming and Collecting Giant Employee Retention Credits

amazon.com

[Lee B]

The publication date is August 14th, so hopefully it's up to date.

The regular Kindle price is $ 9.99

Kindle Unlimited has a 30 day free trial, then it costs $9.99 per month.