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Op-Ed: We need the employee retention tax credit working

By Ryan Taylor, Coalition to Preserve American Jobs

Ryan Taylor

We all remember the dark days of the COVID-19 pandemic when small businesses in Alabama and across the country struggled to keep their doors open and their employees paid. Restaurants, shops, and service providers fought to survive, adapting to new safety measures and facing unprecedented economic challenges. The local diner, the neighborhood hair salon, the family-owned hardware store – these businesses are the heart of our communities, and they continue to struggle in the aftermath of the pandemic.

For the past few years, we have all watched grimly and helplessly as some of our favorite small businesses made the difficult decision to close. The ones that remain are still reeling.

When the pandemic began, Congress enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act, reimplementing a tried-and-true relief measure for businesses in times of national emergencies called the Employee Retention Tax Credit, or ERC. The ERC has been a lifeline for many businesses since it was created in 2005 after Hurricane Katrina, allowing job creators to retain employees and maintain operations during crises.

Businesses that have been able to use the ERC program know how useful it’s been. It’s benefited communities, saving jobs and keeping your favorite restaurants, home builders, hardware stores, sporting goods stores and so many others open for businesses in Alabama. But for many others, the story has been one of failure by the IRS. The Service has dropped the ball on ERC claims processing and job creators are paying the price. Right now, there are tens of billions in unclaimed funds and a backlog of over 1.4 million claims. At this point, some business owners have waited years for their credit with no end in sight. 

Compounding the problem is the fact that a recent survey conducted by OnDeck found that 70 percent of small businesses have less than four months of operating cash on hand. This is important because of the trickle-down effect this has on the rest of the economy. Small businesses owners who are facing a cash crunch are less likely to consider expanding their business, buying new equipment, or hiring new staff. 

In September of last year, the IRS announced a moratorium on processing new ERC claims. While the IRS is holding a minimum of between 180,000-300,000 valid claims, they have decided to prioritize issuing denial letters for potentially fraudulent claims. Small businesses paying the price while the IRS seems to be more interested in padding rejection letter statistics, instead of doing the work needed to support every day Americans. 

On the question of fraud, the IRS’s decision to impose a blanket moratorium on ERC claims is like swatting a fly with a baseball bat. To be clear, instances of fraud and abuse should not be tolerated. Fraud should be rooted out and prosecuted wherever it exists in government programs. But the IRS cannot bypass the majority of legitimate, low-risk ERC claims, ignore written law, and slow roll this program. Believe me, I share the IRS’ concerns about government waste. The Service can do its part by running a more efficient ERC program.   

The IRS’ 78,000-person workforce is perfectly capable of sifting out invalid applications and processing low-risk claims in a timely manner. I fear their leadership is letting them down. Let’s join with our friends, neighbors, and business communities in urging IRS leadership to let its employees do their jobs and encourage Alabama’s congressional delegation to continuing advocating for the immediate lifting of the moratorium and the processing of low-risk ERC claims. Working together, we can protect the ERC and the future of our local economies. Small businesses and their employees are counting on it. 

Ryan Taylor is the spokesperson for the Coalition to Preserve American Jobs (CPAJ), a national group comprised of associations representing small businesses and responsible tax professionals and CEO of 440 Strategies. 

 

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