What is IRS Form 7200?
IRS Form 7200, the Advance Payment of Employer Credits Due to COVID-19, is to be used by employers wanting to request an advance of the refundable tax credit for qualified sick and family leave wages and the refundable employee retention credit that is usually claimed on their federal tax returns. And, this employer relief is made available under the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security Act (CARES) Act.
The guidelines of the FFCRA states that any employer paying the wages for qualified family and sick leave wages during the period beginning April 1, 2020, and ending December 31, 2020, are eligible to offset the cost of providing the required leave with refundable tax credits dollar-for-dollar up to certain amounts.
Generally, the eligible tax credits for a quarter are greater than the amount of employment tax deposits due for that quarter. Hence, the employer can file Form 7200 to request an advance payment on the excess credits from the IRS before filing their employment tax returns.
When it comes to employee retention credit, the Coronavirus Aid, Relief and Economic Security Act (CARES) Act provides a refundable credit to certain employers that are subject to a full or partial closure order due to COVID-19, or those with a significant decline in gross receipts.
The advance payment on credits claimed on Form 7200 are the ones that are otherwise claimed on the below employment tax returns.
Form 941, Employer’s QUARTERLY Federal Tax Return.
Form 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono.
Form 941-SS, Employer’s QUARTERLY Federal Tax Return (American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands).
Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees.
Form 943-PR, Planilla para la Declaración Anual de la Contribución Federal del Patrono de Empleados Agrícolas.
Form 944, Employer’s ANNUAL Federal Tax Return.
Form 944(SP), Declaración Federal ANUAL de Impuestos del Patrono o Empleador.
Form CT-1, Employer's Annual Railroad Retirement Tax Return.