Everything employers need to know about filing Form 7200 during COVID-19.
Two things we’re all appreciating during these difficult times: that feeling of taking off your mask after a long day and getting tax relief for your business. Taking care of your employees has taken a lot of strength during COVID-19, but when it comes to taxes, you don’t have to do it alone.
What is Form 7200
IRS Form 7200 allows employers to request an advance payment on the tax credits they are eligible for under the FFCRA or the CARES Act.
Your business can claim its refundable tax credits by filing Form 941, but if you need aid before that, you have a couple of options. Form 7200 helps you get the full amount of credits that you are eligible for as soon as possible.
FFCRA Payroll Credit for Family and Sick Leave
Under the Families First Coronavirus Response Act (FFCRA), employers can get tax credits to help them pay employees for qualified family leave or sick leave. This aid is available from April 1, 2020 to December 31, 2020.
Employee Retention Credit
In response to the way COVID-19 has affected the U.S. unemployment rate, the CARES Act is offering Employee Retention Credit. This tax relief encourages employers to keep their employees on payroll with refundable tax credits. For each eligible employee, you could receive 50% of their qualifying wages, up to $5,000, to use against certain employment taxes. This tax relief is available from March 12, 2020 to January 1, 2021.
Click here to find out more about how you can keep your team together with Employee Retention Credit.
Should I File Form 7200?
You only need to file Form 7200 if the amount of tax relief your business is eligible for is greater than your deposit to the IRS.
First, you should withhold whatever tax credit amount you are anticipating from the Social Security portion of your employment taxes. All you need to do is subtract that amount from your payment to the IRS.
So what happens if your business is eligible for more tax credits than whatever payment you owe on the Social Security portion of your employment taxes? You can still get those extra tax credits before your Form 941 deadline by filing Form 7200.
When you file Form 7200, the IRS will pay you an advance on those extra tax credits so that you can pay your employees.
How to File Form 7200
Filing Form 7200 is easy when you e-file. With ExpressE-file, all you need to do is enter your employer details, choose which calendar quarter you are filing for, select your Employment Tax Return Type, and enter the credit amount you need in advance. We will check for errors and fax your request to the IRS instantly.
Whether you just reduced your payments or requested an advance with Form 7200, you will need to reconcile everything with the IRS on Form 941. The IRS just updated Form 941 so you can report all your COVID-19 tax relief decisions. Visit this blog for more information about IRS Form 941 changes. Here are our top tips for filing Form 941.
If you have any questions about filing, please don’t hesitate to reach out. Our support team is 100% U.S.-based and always happy to help.