The Employee Retention Credit (ERC) was created during the pandemic to provide companies with some payroll tax relief and encourage them to avoid employee layoffs. The IRS has finally released official guidance on the eligibility of salaries paid to business owners and their spouses to receive the ERC, and unfortunately, it's not good news for eligible employers. When it comes to the ERC, the percentage of ownership matters. Salaries paid to landlords above 50% may not be eligible for credit.
The IRS also examines the related individuals (family members) of the majority shareholders and their salaries to determine if the company can take advantage of the credit. If the majority owner of a company does not have any brothers or sisters (all or mixed race), grandparents or direct descendants, then their spouse is eligible to receive the ERC. However, if the majority owner has any living family members other than their spouse (by blood or marriage), their salary may not be eligible. Technically, landlords earn wages for their work in the company, but they are not necessarily included in the IRS guidelines for the employee retention credit.
But what about shareholder salaries? Can you also apply for the landlord's wage credit? Learn about the salaries of the owners of the employee retention credit below. Justin Elanjian, CPA, is the partner in charge of employee retention credit (ERC) services for 26% of the Aprio Check Protection Program (PPP).