A small sign indicates the headquarters of the Internal Revenue Service on April 7, 2023 in Washington, D.C. (Chip Somodevilla/Getty Images)
It’s no secret small businesses in Idaho and across the country suffered during the COVID-19 pandemic, and many are still suffering – this time because of failures at the IRS.
COVID-19 effects were widespread across business sectors. Manufacturers, restaurants, hotels, and Main Street businesses across Idaho all felt the impacts. Rural America saw the impacts as well, including farmers, ranchers, and ag suppliers. To combat this, Congress deployed the Employee Retention Tax Credit, or ERC, to help support businesses and keep Americans on the job and earning wages.
The ERC distributed economic aid quickly at the beginning of the pandemic – ensuring businesses could keep their lights on and Americans had jobs to feed their families.
With small businesses employing a majority of the American workforce, Congress knew the stability of small businesses in the wake of the pandemic was crucial to the stability of the U.S. economy as a whole.
For employers that have been able to access the credit, the ERC has been crucial.
Small business owners will tell you the most important benefit of the ERC has been keeping their valued employees on the payroll during an uncertain time for our whole country.
Unfortunately, the number of ERC claims processed by the IRS slowed to a trickle. In fact, it has been one year since the IRS imposed a moratorium on new Employee Retention Credit claims, and the backlog to process claims has reached over 1.5 million. However, since the moratorium was imposed, the IRS decreased processing from 20,000 ERC claims per week to 1,000-2,000 claims per week. And over the summer, the IRS issued mass denials of ERC claims that reporting by the Wall Street Journal showed contained obvious errors and mistakes, costing businesses with legitimate claims dearly.
At this pace it will take the IRS over a decade to work through the backlog of claims – far too long for the 1.5 million businesses that struggle with the countless challenges the pandemic continues to pose: inflation, skyrocketing costs for materials, and supply chain issues that meant they could not keep the items customers needed in stock.
It is frustrating for small business that have submitted their legitimate claims to the IRS, but still have not seen the benefits. The clock is ticking for the IRS to do the right thing.
The IRS can take steps right now to correct its ERC approach and accurately evaluate and process ERC claims. It can act quickly to ensure that legitimate filers receive their relief in an expeditious manner. And it has the power to extend the timeframe for applicants to submit appeals if they were wrongly denied. The National Taxpayer Advocate, which reports to the U.S. Secretary of Treasury, has called for a 30-day appeal window for denied ERC applications. This is a start.
In the meantime, many businesses will face hard choices about their financial futures.
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