April 1, 2020
2020-0815 IRS releases draft Form 7200 for claiming advance payment of COVID-19 employment tax credits On March 30, 2020 the IRS issued draft Form 7200, Advance Payment of Employer Credits Due to COVID-19 and instructions for requesting advance payment of the three COVID-19 employment tax credits for qualified sick leave wages, qualified family leave wages and the employee retention credit. Form 7200 is used to request an advance payment of tax credits on the Form 941 series of forms, including: - 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
Note that IRS has not yet modified the above forms to accommodate the COVID-19 employment tax credits; however, the revised Form 941 is expected before the April 30, 2020 due date for filing the 2020 first quarter return. It is expected that the revised Form 941 will also include the fields necessary for taking advantage of the Social Security tax deferral provided under Section 2302 of the CARES Act. (See EY Tax Alert 2020-0773.) Effective date of the COVID-19 employment tax credits - Qualified sick and family leave wage credit. As the IRS explained in Notice 2020-21, employer tax credits for qualified sick leave wages and qualified family leave wages apply to those wages paid for the period from April 1, 2020, to December 31, 2020.
- Employer retention tax credit. The employer tax credit for qualified wages for retention of employees during suspension of operations due to a government order or due to a significant decline in gross receipts applies to wages paid after March 12, 2020, and before January 1, 2021. The credit due to a significant decline in gross receipts is available for the period beginning with any quarter in which the employer's gross receipts are less than 50% of what they were in the same calendar quarter in 2019 and ending with the quarter that follows the first quarter beginning after the quarter in which your gross receipts were greater than 80% of what they were in the same calendar quarter in 2019.
When to file Form 7200 The employer can file the form for advance credits anticipated for a quarter at any time before the end of the month following the quarter in which you paid the qualified wages. If necessary, the employer can file Form 7200 several times during each quarter. Employers are instructed that they should not file Form 7200 after they file Form 941 for the fourth quarter of 2020, or the annual Forms 943, 944, or CT-1 for 2020. Additionally, employers should not file Form 7200 to request advance credits for any anticipated credit for which they already reduced their federal employment tax deposits. Recordkeeping requirements All records of employment tax and employment tax credits must be retained for at least four years for IRS review, including the following: - Documentation to show how you figured the amount of qualified sick and family leave wages eligible for the credit
- Documentation to show how you figured the amount of the employee retention credit
- Documentation to show how you figured the amount of qualified health plan expenses that you allocated to wages
- Documentation to show how you determined that employees were qualified to receive sick and family leave wages, including any additional information set out in Frequently Asked Questions or other guidance on the IRS website
- Documentation to show your eligibility for the employee retention credit based on suspension of operations or significant decline in gross receipts
- Copies of completed Form(s) 7200 you filed with the IRS
IRS frequently asked questions For more information on the COVID-19 employment tax credits, see the following IRS resources. ——————————————— Contact Information
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