NY small businesses getting $20 million in COVID aid after years in limbo

Nearly 300 small business owners across the state can expect a combined $20 million in Covid-era funds that will be paid out by the federal government after years in limbo, officials said.

The tax credit from the IRS comes almost five years after the Covid-19 pandemic shut down the city and years after the federal government originally promised the funds. The aid was meant to go to small businesses that kept staffers employed during the lockdown.

The $20 million going to New York businesses is part of $50 million in Employee Retention Credit refunds owed to 585 small businesses across the country. The delay in issuing ERC funds was largely the result of rampant fraud from businesses seeking illegal payouts. The IRS previously put a moratorium on processing claims so it could review the backlog of applications.

Rep. Dan Goldman, a Democrat who represents parts of Manhattan and Brooklyn, said he along with other federal leaders and advocates pressured the government to make good on its debt.

“This was a government program that promised these small businesses that they would benefit from retaining employees, which they did,” Goldman said in an interview. "But then to have to wait as much as four years to get these benefits just seemed wrong. It put a lot of them at risk of going out of business altogether.”

Goldman pointed to understaffing and underfunding within the IRS as among the reasons business owners had to wait so long.

"The IRS is now disbursing tens of millions in long overdue funds to hundreds of New York small businesses," Sen. Chuck Schumer said in a statement. "We’ll keep pushing for the IRS to swiftly resolve the backlog."

The tax credit Dara Epstein will receive from the federal government is already going to good use, she said. The child care service she runs, called Smart Sitting, serves New York City, Jersey City and Hoboken. She said she plans on making a new hire that will help her already depleted staff.

“Even though it’s just part of the total amount that we will hopefully, eventually, get, it’ll allow us to make a hire that we’re desperate to make right now. So it’s extremely meaningful,” Epstein told Gothamist.

Her childcare service – which has been around since 2009 – took a blow during the pandemic after its on-demand babysitting services stopped immediately when parents began to quarantine.

Within the first few weeks of the pandemic, Epstein said she and the rest of her staff took massive pay cuts to continue to keep the business afloat. And while some pandemic aid allowed Smart Sitting to get its wages back up, Epstein said she was touched to see her staff agree to pay cuts in order to keep the place running.

But it’s a sacrifice that business owners like Epstein should already have been relieved of, said Michael Seckler, who heads Justworks, a small business advocacy group based in New York City.

“The businesses were able to get through the pandemic,” he said. “This is money that they can use to reinvest in their companies.”

Seckler said there’s at least $90 million in tax credits still stuck in limbo. Epstein herself said she is waiting for another another $100,000 in pandemic aid that the federal government still owes.

“Me making one hire means that we are able to support hundreds of additional families and caregivers,” she said.