Employee retention credit

Your Employee Retention Credit (ERC) Questions Answered Here

Are Wages Paid to the Sole Corporate Owner considered Qualified Wages for the Employee Retention Credit?

Does the Corporate Owner qualify for the Employee Retention Credit?

Read on to find these answers in the conclusion.

Are wages paid to employees who are related individuals considered qualified wages for ERC? No. Wages paid to related individuals are not taken into account for ERC purposes.

A related individual is any employee who has any of the following relationships to the employee’s employer:

  • 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.

What if the Eligible Employer is a corporation?

In that case, a related individual is any person that has a relationship described above with an individual owning, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation.

Suppose the Eligible Employer is an entity other than a corporation?

In that case, a related individual is any person that has a relationship described above with an individual owning, directly or indirectly, more than 50 percent of the capital and profits interests in the entity.

What if an Eligible Employer is an estate or trust?

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 trust.

CONCLUSION: Since the corporation is not going to have a daughter-in-law, the IRS created a reference to the individual who owns more than 50 percent of the corporation. The IRS does not single out the corporate owner and does not refer to the spouse. Using this information, the sole corporate owner qualifies for the ERC.

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