Advocating for Small Businesses: Employee Retention Tax Credit (ERTC) Delays

Imagine you're a small business owner who weathered the storm of the pandemic, keeping your team together against all odds. Initially introduced as part of the CARES Act in 2020, the Employee Retention Tax Credit (ERTC) was designed to incentivize this. 

Like millions of small businesses across the country, you did your part. You stepped up and kept your people on payroll during a challenging time. And since then, you have operated expecting to receive the ERTC funds you filed for—budgeting to get tens of thousands of dollars (or more) back to bolster your business, rebuild your reserves, and continue to retain your team long-term.

The reality, however, has been different. Due to an influx of fraudulent claims, the IRS issued a moratorium on ERTC processing in 2023, leaving you—and countless other legitimate small businesses—on the hook for the funds you were promised. While some companies have reached even deeper to continue to retain their employees, the moratorium and subsequent delays have placed a huge strain on the small business recovery. Many small businesses, including some of our own customers, have just now had to make their first layoffs—despite keeping their teams intact through the pandemic.

What’s at Stake

Over the past three years, Justworks has helped thousands of eligible small businesses on our platform file ERTC claims with the IRS. While some of this money has been disbursed, we have close to 1,000 customers still awaiting funds totaling about $145 million. On average, each of these businesses—employing about 12 people—is owed approximately $159,000. 

These small businesses, and millions more just like them, are the backbone of our economy. According to the U.S. Chamber of Commerce, they:

• Employ 46% of the U.S. workforce: Nearly half of all American workers are employed by small businesses.

• Drive innovation: Businesses with 5–9 employees receive more patents per employee than larger companies.

• Create jobs: Small businesses generate roughly 1.5 million jobs annually.

• Operate efficiently: 33% launch with less than $5,000, demonstrating remarkable efficiency and resilience.

To put the impact of these ERTC delays into perspective, consider that 58% of small businesses launch with less than $25,000. Now imagine the impact of $159,000 you budgeted for never showing up—with no explanation or communication.

Advocating for Our Customers

With this in mind, the Justworks team recently traveled to Washington, D.C., with seven of our small business customers. We met with staff from eight different Congressional offices to advocate for the timely processing of ERTC claims. In these meetings, our customers took center stage and shared their stories, emphasizing how the continued delays in receiving the ERTC funds they are owed are now impacting their ability to survive, plan for the future, and thrive. 

Fortunately, we found many lawmakers receptive to our cause. Their teams were well-versed in the ERTC program—in part due to the National Association of Professional Employer Organizations’ (NAPEO) continued engagement on this issue. To summarize our meetings: we found ourselves aligned on the need to root out fraud, waste, and abuse within the ERTC program while also agreeing that it's imperative to encourage the IRS to distinguish and expedite legitimate claims—and soon. Our goal was not to seek additional funds or extensions but to ensure that small businesses receive what they are rightfully owed.

We're now working closely with some of these legislators' staff to:

1. Ensure the IRS processes the remaining ERTC claims for small businesses. Every day, we see the tough decisions customers are having to make without these funds.

2. Support transparency and communication from the IRS—because our customers can handle the truth. All small businesses deserve to know the status of the ERTC program and a clear timeline for processing claims so they can make informed decisions and plan for the future. 

Just recently, the IRS announced that it is accelerating work on ERTC claims. It is currently processing 400,000 backlogged claims worth about $10 billion.

What’s Next

Wherever our customers are still awaiting what’s owed to them, we remain committed to advocating on your behalf, providing updates, and supporting you however we can.

After all, every small business journey involves resilience and determination. Founders turn ideas into reality and create jobs that give meaning to millions of people’s lives. Now, they deserve the ERTC funds promised to them for keeping these people employed during a challenging time. It's important that we stand by every small business that answered the government’s call during COVID, and it's a source of deep pride to be able to help make sure your voices are heard in Washington, D.C.

There's more work to be done, but we're optimistic about the impact of our meetings and the path ahead.