Small businesses are the backbone of our economy, but they are often the most vulnerable during disasters. Whether it’s a natural calamity, a pandemic, or another unforeseen event, the impact on small businesses can be profound. Mother Nature can be unexpectedly harsh leaving a wake of massive human and economic destruction and disruption. The Disaster Employee Retention Tax Credit [DERC] is a federal income tax credit designed to encourage employers to retain affected employees after any of the 59 eligible 2018-2020 natural disasters in 28 states and territories across the US.  It is designed to help these businesses weather the storm and emerge stronger. Here’s how this powerful tool benefits small businesses:

• Immediate Financial Support When disaster strikes, immediate financial support can make all the difference. The Disaster ERC provides a direct tax credit for retaining employees, offering a much-needed financial cushion. This support can help businesses manage immediate expenses and maintain operations during challenging times.
• Sustaining Employment One of the biggest challenges during a disaster is the risk of losing valuable employees. The DERC incentivizes businesses to keep their staff employed, ensuring that they don’t have to start from scratch once the situation improves. This stability is crucial for maintaining productivity and service levels.
• Enhancing Recovery Efforts With the financial relief provided by the DERC, small businesses can focus more resources on recovery efforts. Whether it’s repairing physical damage, replenishing inventory, or investing in new technology, the DERC enables businesses to allocate funds where they are needed most, accelerating the recovery process.
• Strengthening Community Ties Small businesses are often integral parts of their communities. By retaining employees and continuing operations, they can provide stability and support to the local economy. This not only helps the business itself but also benefits the wider community, fostering resilience and solidarity.
• Long-Term Financial Health Beyond immediate relief, the DERC contributes to the long-term financial health of small businesses. By improving cash flow and reducing the financial burden, businesses can plan for the future with greater confidence. This includes investing in growth opportunities and enhancing disaster preparedness.

The Disaster Employee Retention Credit is a critical resource for small businesses facing the aftermath of a disaster. It is worth up to $2,400 per qualified employee and offsets an affected business’s federal income tax liability. An eligible employer who continued to pay or incur wages after the employer’s business became inoperable because of damage from a qualifying major disaster may be able to claim a credit equal to 40% of up to $6,000 of qualified wages paid to or incurred for each eligible employee.  By offering financial relief, supporting employee retention, and enhancing recovery efforts, the DERC helps businesses navigate challenging times and build a resilient future. Small business owners should explore this opportunity to see if they qualify to ensure they have the support needed to overcome adversity and thrive in the long run.