IRS Releases Instructions for Form 7200 for Advance Payment of FFCRA Tax Credits

On April 1, 2020, the IRS issued instructions for Form 7200, Advance Payment of Employer Credits Due to COVID-19, which is a new form that employers file in order to receive the refundable tax credits available under the FFCRA and the CARES Act.

As background, the FFCRA provides a tax credit that reimburses employers dollar-for-dollar for certain costs associated with providing employees with required paid sick leave and expanded family and medical leave related to COVID-19, from April 1, 2020, through December 31, 2020. The CARES Act provides a tax credit to refund employers 50 percent of wages paid to employees after March 12, 2020, and before January 1, 2021, while experiencing hardship due to COVID-19.

The IRS encourages employers to utilize the credits by retaining the amount of employment taxes equal to the amount of qualified sick and family leave wages (plus certain related health plan expenses and the employer’s share of the Medicare taxes on the qualified leave wages) and their employee retention credit, rather than depositing these amounts with the IRS. If that amount isn’t enough to cover the cost of qualified sick and family leave wages (plus the qualified health expenses and the employer share of Medicare tax on the qualified leave wages) and the employee retention credit, employers can file Form 7200 to request an advance payment from the IRS.

Employers can file the form for an advance payment of the credits anticipated for a quarter at any time before the end of the month following the quarter in which they paid the qualified wages. If necessary, they can file Form 7200 several times during each quarter. However, Form 7200 should not be filed after Form 941 for the fourth quarter of 2020 is filed, or filed after filing Form 943, 944, or CT-1 for 2020. In addition, the form should not be filed in order to request an advance payment for any anticipated credit for which the employer already reduced its deposits.

Employers should work with their accountant to determine if they are eligible to claim the credits and to file Forms 7200.

Form 7200 »