Small-business owners in the Southeast who’ve been waiting for long-delayed pandemic aid are pushing for the money to recover from this fall’s brutal hurricane season. The federal government says more of it is heading their way soon.
Around 400,000 claims worth $10 billion are being processed for eligible business owners who applied for tax refunds under the Covid-era Employee Retention Credit (ERC) program, the IRS said Thursday.
The agency didn’t give a concrete timeline or geographic details about the applicants, but it said Thursday that it’s accelerating work on those claims, and it estimated this summer that at least 1.4 million were still in the queue.
“Our top priority is to quickly help taxpayers affected by the devastation of Hurricane Helene and Hurricane Milton,” IRS spokesperson Mike Martinez told NBC News. He also highlighted recently announced tax relief for those in affected regions, including filing and payment extensions for individuals and businesses. “We understand the urgent need across the federal government to provide financial assistance to small businesses.”
Martinez urged small-business owners in affected communities whose ERC claims are still under review to contact the IRS Disaster Hotline and check their applications’ statuses. For taxpayers with fully processed ERC claims whose mail routes have been disrupted, the U.S. Postal Service will hold checks at the closest distribution hubs until operations resume, the agency said.
The tax program allows businesses to claim up to $26,000 per employee on its payroll. Many of the delays have stemmed from efforts to redress a wave of fraudulent claims and companies running scams promising to help employers apply for funding through the program.
Maia Toll and Andrew Celwyn, spouses and co-owners of Herbiary, an apothecary in Asheville, North Carolina, said the nearly $115,000 in ERC money they are owed would be a lifeline for their business right now.
They applied for the tax credit — launched as part of the CARES Act in March 2020 — last summer, hoping to shore up the $100,250 Small Business Administration loan they took on when the pandemic tanked their store’s revenue by a third.
With sales picking back up in later months and Toll, an author and writing coach, publishing about a book a year, the Herbiary’s business had steadied somewhat. But since Helene swept through western North Carolina two weeks ago, the historic Pack Square area where their business is located is still without water, which means its six Asheville employees — some of whom remain scattered after having evacuated — can’t use the restroom or wash their hands to safely handle the organic herbs and teas it sells.
The store had no internet until Wednesday, hampering sales to customers without cash or Cash App. And as package carrier routes were disrupted in the devastated Asheville area, so was the store’s “symbiotic” relationship with its Philadelphia location, where the spouses ship inventory, Toll said. Open hours have been halved to 12 to 4 p.m.
The business’ losses amount to $12,000, the couple estimated. Home insurance will cover the necessary roof repair after Helene lobbed a tree onto their home in the wooded Riceville neighborhood, but they’re still fielding estimates to remove the 11 other downed trees on the property.
“It would be transformative,” Toll said of the ERC credit, “especially because right now, we’re going to be in the same situation all over again: We’re going to be trying to retain our employees and keep them as healthy and viable as possible without the income.”
“Our life is mush,” she added.
Toll contacted the office of Sen. Thom Tillis, R-N.C., early this month requesting help securing the funds from their application. “One of the best things you can do for small biz in WNC is get ERTC payments into our hands,” she wrote in an email, seen by NBC News, in response to his office’s request for her to fill out IRS privacy and claim documents.
Tillis’ office didn’t respond to requests for comment. Last month, he co-authored a bill to close down the program and cease processing any claims filed after January 2025.
“Repealing the ERTC is a critical step towards addressing America’s debt crisis,” he said in a statement at the time. “It’s past time to eliminate this fraud-ridden pandemic-era policy so we can concentrate on getting our fiscal house in order.”
The tax program was originally projected to cost the government $55 billion. But by last fall, that estimate had ballooned to $230 billion as a result of what IRS officials described as massive fraud boosted by third-party firms that urge entrepreneurs to apply with dubious promises of maximizing their credits.
The IRS has blamed the refund delays on resource-intensive work to weed out invalid claims. It put a monthslong moratorium on processing applications and set up programs for applicants to withdraw incorrect submissions without penalties or interest.
Toll and her husband reached out to a third-party firm to submit their ERC application in May and now have doubts about the contract agreement, which required them to pay the company 18% of their expected refund up front — or 25% after funds were disbursed. To avoid destabilizing Herbiary’s operating margins, they took out a $30,000 loan from Intuit at a 12.5% interest rate.
Between that loan and the SBA loan, the couple now pay about $2,300 monthly to take care of the balances.
“It would almost put us back at clean slate,” Toll said of their hoped-for ERC refund. “I know bigger companies often run on debt, but we’re a tiny company, and that just doesn’t make sense for us.”
