ERTC Claims for Shared Employees in Multi-Employer Situations
Employers who operated businesses in 2020 and 2021 can recall how difficult it was to stay afloat. The government introduced the Employee Retention Tax Credit to support struggling businesses. Today, business owners can still retroactively file for the tax credit.
However, there are many factors to consider. One question you may have as an employer is how to coordinate ERTC claims when you own multiple businesses. The Dayes Law Firm ERTC team is a resource for claiming the ERTC for multi-employers.
What Is the ERTC?
The Employee Retention Tax Credit (ERTC) is a form of COVID-19 relief the government offered businesses starting in 2020. As businesses struggled to stay open, employees were losing jobs. To prevent further damage, the ERTC compensated business owners for keeping employees on their payroll.
The initial eligibility requirements according to the Coronavirus Aid, Relief, and Economic Security (CARES) Act excluded many businesses. In 2021, the Consolidated Appropriations Act expanded these requirements to offer aid to more businesses. Additionally, the ERTC was extended through 2021.
However, the Infrastructure Investment and Jobs Act limited the ERTC to the first three quarters of 2021, except for startup recovery businesses. Understanding the ERTC’s evolution is vital when claiming and reporting it accurately.
What Businesses Qualify for the ERTC?
To qualify for the ERTC, your businesses must pass the gross receipts test or the suspension of operations test.
Your business must have seen a 50% decline in gross receipts for 2020 quarters when comparing them to each quarter in 2019 or a 20% decline for 2021 quarters to pass the gross receipts test.
If you don’t qualify through the gross receipts test, you may be eligible to claim the ERC through the suspension of operations test if you experienced a partial or full suspension of operations due to a government mandate.
For businesses that began operating in 2019, for the purposes of the ERTC, you should use the first quarter the business was running as the base for calculating quarterly decline.
Can I Claim the ERTC as a Multi-Employer?
Yes, you can claim the ERTC as a multi-employer. When you have multiple businesses or entities under shared ownership, the Internal Revenue Service (IRS) deems it a controlled group of entities. When you claim the ERTC, you may treat the controlled group of entities as a single employer.
This means you can evaluate your business’s eligibility as an aggregate, including:
- If you had a significant decline in gross receipts
- Your number of average employees
- Calculating qualified wages
There are three types of companies the IRS classifies as controlled groups for the purposes of the ERTC for multi-employers:
- Parent-subsidiary groups: Chains of corporations in which one common parent owns 50% or more of all entities
- Brother-sister groups: Two or more corporations in which five or fewer people own 80% or more of each entity with at least 50% of the voting power
- Combined groups: Three or more corporations that act as combinations of parent-subsidiary controlled groups and brother-sister controlled groups
When claiming the ERTC, note that larger businesses can only claim wages they paid as eligible employers while their employees were unable to work. Small businesses (100 or fewer employees in 2020 or 500 or fewer in 2021) are eligible to claim 50% of all wages up to $10,000 per employee for 2020 and 70% of the same for 2021.
Claim the ERTC as a Multi-Employer With Experienced Attorneys
Filing for the ERTC for multi-employers is a complex process. To ensure you file accurately, work with the ERTC recovery team at Dayes Law Firm. Call 866-684-8114 today for a free consultation.