Navigating Complex ERTC Filing for Multi-State Businesses

August 14, 2023
Dayes Law Firm

Are you having trouble claiming your Employee Retention Tax Credit (ERTC) correctly? This credit could give you up to $26,000 per employee as a reward for keeping workers on the payroll while navigating pandemic-related challenges. But like any tax credit, the ERTC requires careful filing and consideration to ensure that you claim it correctly. 

If your business operates across multiple states, you must understand how to calculate qualifying wages. Learn more about ERTC filing for multi-state businesses from the tax professionals at Dayes Law Firm.

Understanding the ERTC Aggregation Rules

How you approach your ERTC filing as a multi-state business depends on your company’s classification under ERTC aggregation rules. As long as your business is still a single company, even if you have multiple locations, it’s likely a controlled group for tax purposes. 

The ERTC aggregation rules require that the members of a controlled group calculate their tax credit as a single employer rather than dividing the business into separate entities. 

Why Do Aggregation Rules Matter For Multi-State Businesses? 

The ERTC aggregation rules are useful in determining whether your business qualifies for this tax credit. Your business must meet one important criterion to be eligible: full or partial suspension of operations due to government orders during the pandemic, leading to a significant decline in gross receipts

The pandemic impacted numerous businesses across the U.S., and the ERTC seeks to make up for times when businesses could not operate at full capacity due to government shutdowns. Knowing whether to aggregate your business as a single employer can help you correctly calculate your decline in gross receipts and recognize whether your business experienced losses due to a suspension of operations. 

What If Only Some of Your Business Locations Experienced Suspension of Activity? 

As a business that operates in multiple states, your company is likely to have followed lockdown orders in each state of business. Every state had slightly different timelines for limiting business operations at the beginning of the pandemic and lifting lockdown orders.

What if only one of your business locations actually experienced “partial or full suspension of business operations?” According to Internal Revenue Service guidance, you would still be eligible for the ERTC.

Because your business locations are members of an aggregated group, you would be deemed a single employer, meaning that all of your locations could be eligible for the ERTC — even ones that lockdowns didn’t significantly affect. 

Calculating Qualified Wages as a Multi-State Business

Accurate ERTC filing for multi-state businesses involves determining the qualified wages across all your business entities. While the exact process you use may vary, your multi-state business will likely need to calculate qualified wages as if your multiple locations were all part of a single business.

  • If your business (as a whole) had fewer than 500 full-time employees in 2019, you can claim credit for everyone on your payroll.
  • If your company had more than 500 full-time employees in 2019, you can only claim credit for the employees who were not working at all or were working a reduced schedule due to the pandemic.

After determining the qualifying wages paid to employees, you can claim up to 70% of each employee’s first $10,000 in qualified wages per quarter. 

Need Assistance with ERTC Filing?

Miscalculating qualifying wages for the ERTC could result in a tax penalty of up to 20% of the excessive amount you claimed. Instead, consult a tax attorney well-versed in the complexities of this tax credit. 

Do you need help with ERTC filing for multi-state businesses? We can help you file for it or file an amended employment tax return and relevant ERTC forms to correct any issues. Reach out to Dayes Law Firm today. Call (800) 503-2000 or fill out the online form for a free consultation.