The promise will be kept. However, Employee Retention Tax Credit.
Four years ago, the federal government promised small businesses that they would be compensated if they kept their employees on the payroll during a once-in-a-lifetime global pandemic. But in hundreds of thousands of cases, that promise hasn’t been kept.
The IRS has publicly estimated that 10 to 20 percent of outstanding Employee Retention Tax Credit claims are at “low risk” of fraud, meaning hundreds of thousands of businesses that followed the rules and kept employees on the payroll have yet to receive a cent of what they were promised. And their estimates are likely low.
These small businesses have waited months or even years — many stretching back into 2020 and 2021 — for the funds they rely on and desperately need. Stories of layoffs, loan sharks, bankruptcies and closures due to these delays have become all too common.
A failed vote this month on a federal tax bill that would have distinguished between legitimate claims and fraudulent Employee Retention Tax Credit claims only perpetuates the frustration of American business owners and their employees who continue to feel the effects of inaction despite playing by the rules.
The IRS could significantly reduce this logjam and ease this financial burden by processing the consolidated returns of professional employment organizations, which by definition are already subject to additional scrutiny to ensure accuracy and eligibility.
If there was time to shine a spotlight on why the charges were unjust, the IRS did just that. In the release Last month, the IRS also needed time to process claims it found to be legitimate.
During the ongoing processing suspension period, which was scheduled to end in January, the agency said it took the time necessary to distinguish between legitimate claims and those of fraudulent factories set up only to embezzle government funds. With legitimate claims being siloed, there is no reason they cannot be processed expeditiously and swiftly.
This would relieve public pressure on the IRS and properly reward those who acted responsibly to keep their employees on the payroll during these enormous financial challenges. The relationship of trust between small businesses and the federal government has broken, and Washington is starting to realize it.
National Taxpayer Advocate Erin Collins recently He told parliament IRS processing times need to be reduced, as delays are harming many taxpayers with legitimate claims.
Earlier this month, Sen. Tommy Tuberville (R-Ala.) told IRS Commissioner Danny Wuerfel that the situation was “terrible” for small businesses in his state.
Rep. Claudia Tenney (R-NY) also wrote to the commissioner, saying that processing taxpayer returns and claims is the “most fundamental” part of the IRS’s job. Tenney added that if they don’t, the possibility of laying off hard-working employees or closing down altogether will continue to grow across her district.
Meanwhile, Warfel recently told Congress that while the agency is processing 1,000 to 2,000 claims a week, it is receiving 17,000 in a seven-day period — a pace that means the backlog will never clear and will likely continue to grow.
Meanwhile, your local pharmacy will be forced to raise prices again and again after taking out yet another high-interest loan. The construction company responsible for needed road repairs in your town may be forced out of business. And your favorite cashier at the grocery store? She’ll be handed a layoff letter, along with thousands of others. The potential impacts rippling through towns across America are unsettling, to say the least.
We fully support the IRS’ mission to root out fraud, but it is essential that the IRS act to expeditiously process legitimate claims.
Our government has made a deal with America’s small business owners: our inability to police government programs is not a good enough reason to punish those who play by our government’s rules and get credit.
Small businesses have done their part. Now it’s time for the government to do its job and expedite the hundreds of thousands of legitimate Employee Retention Tax Credit claims.
Casey Clark is president and CEO of the National Association of Professional Employers’ Organizations.
