IRS promises to rush $10 billion in delayed Covid aid to help businesses devastated by hurricane

Small business owners in the Southeast awaiting long-delayed pandemic aid are pressing for cash to recover from this fall's brutal hurricane season. The federal government says most will be on the way soon.

About 400,000 claims worth $10 billion are being processed for eligible business owners requesting tax refunds under the Covid-19 pandemic Employee Retention Credit Program (ERC), the IRS said Thursday.

The agency did not provide a specific timeline or geographic details about the claimants, but said Thursday that it is expediting work on these claims and that this summer it estimates that at least 1.4 million are still in line.

“Our top priority is to quickly assist taxpayers affected by the devastation of Hurricane Helen and Hurricane Milton,” IRS spokesman Mike Martinez told NBC News. He also highlighted the recently announced tax relief for people in affected areas, including Filing and Payment Extensions for individuals and businesses. “We understand the urgent need across the federal government to provide financial support to small businesses.”

Martinez appealed to small business owners in affected communities whose ERC claims are still being reviewed by the IRS Disaster Hotline to check their application status. For taxpayers with fully processed ERC claims and whose mail routes are disrupted, the U.S. Postal Service will check the nearest distribution centers until operations resume, the agency said.

The tax program allows companies to claim up to $26,000 per employee on their payroll. Many of the delays result from attempts to remedy a surge in fraudulent claims and scam companies promising to help employers apply for funding through the program.

Maia Toll and Andrew Selwyn, husband and wife co-owners of Herbiary, a pharmacy in Asheville, North Carolina, said the roughly $115,000 in ERC money they are owed would be a lifeline for their business at this time. .

They applied for the tax credit — introduced as part of the CARES Act in March 2020 — last summer, hoping to top off a $100,250 Small Business Administration loan they took out when the pandemic slashed their store's revenue by a third.

As sales increased over the next few months and Toll, an author and writing coach, published about one book a year, business at the herbarium stabilized somewhat. But since Helen swept through western North Carolina two weeks ago, the historic Pack Square area where her business is located is still without water, which means her six Asheville employees — some of whom are still dispersed after evacuation – cannot use the bathroom. Or wash your hands to safely sell organic herbs and teas.

As of Wednesday, the store had no internet, making sales difficult for customers without cash or a cash app. And because package shipping routes were disrupted in the devastated Asheville area, the store had a “symbiotic” relationship with its location in Philadelphia, where the spouses ship inventory, Toll said. Opening hours have been reduced by half, from 12pm to 4pm

Losses to the business totaled $12,000, the couple estimated. Homeowners insurance will cover necessary roof repairs after Helen plants a tree at her home in the leafy Riceville neighborhood, but they are still considering removing 11 other trees uprooted from the property.

“It will be transformative,” Toll said of the ERC credit, “especially since right now we are returning to the same situation: we are trying to retain our employees and keep them healthy and as effective as possible without income. “

“Our lives are peaceful,” he added.

Toll contacted the office of Sen. Thom Tillis, R-N.C., earlier this month, requesting help in securing funding for his petition. “One of the things you can do for small businesses in WNC is to give us ERTC payments,” he wrote in an email, seen by NBC News, in response to his office's request for IRS confidentiality and document requirements .

Tillis' office did not respond to a request for comment. Last month, he co-authored a bill to end the program and stop processing any claims filed after January 2025.

“The repeal of the ERTC is an important step in addressing America's debt crisis,” he said in a statement at the time. “It is past time to eliminate this fraud-driven, pandemic-era policy so we can focus on getting our financial house in order.”

The fiscal program was originally projected to cost the government $55 billion. But by last fall, that estimate had risen to $230 billion as a result of what IRS officials described as widespread fraud by third-party companies soliciting applications from business owners with dubious promises to maximize their credit.

The IRS attributed the delay in refunds to resource-intensive work to eliminate illegal claims. Imposes a one-month moratorium on processing applications and Configure the program Applicants can withdraw erroneous deposits without penalty or interest.

Toll and her husband turned to a third-party firm to submit their ERC application in May and are now on the fence about the contractual agreement, which requires their company to pay 18% of the expected return – or 25% of Herbiary's operating margin once the funds are distributed. To avoid bankruptcy, they took out a $30,000 loan from Intuit at 12.5% ​​interest.

Between that loan and the SBA loan, the couple now pays about $2,300 a month to cover the balance.

“This will get us back to a mostly clean slate,” Toll said of the expected ERC reimbursement. “I know that big companies are often in debt, but we are a small company and that doesn’t make sense for us.”