What is the procedure for eligible employers to obtain an advance of the refundable credits?
99 views | Last modified 9/24/2020 3:33:15 PM EST | Added by ExpressEfile Team

Applicable To
Form 941 Form 1099 / W-2 Form 2290

If an eligible employer wants to obtain an advance of the refundable credits, he/she has to file Form 7200, Advance Payment of Employer Credits Due to COVID-19. An employer can file Form 7200 several times before the last day of the month following the end of a quarter in which the employer paid the qualified wages.

However, the employer cannot file Form 7200 after filing Form 941 - Employer’s Quarterly Federal Tax Return, Form 943 - Employer’s Annual Federal Tax Return for Agricultural Employees, or Form 944 - Employer’s Annual Federal Tax Return. 

The employer will be able to claim an advance of the refundable credits based on 

  • The federal employment taxes set aside for deposits for wages paid in the quarter.
  • Qualified leave wages paid to the employee during the quarter.

The employer can obtain an advance of the refundable credits only if the qualified leave wages paid during the quarter is more than the federal employment taxes set aside for deposits for wages paid in the quarter. 

Note: The employer should not have any remaining federal employment tax deposits for the wages paid in the quarter.

For example, an employer paid $9,000 in qualified leave wages to the employees during a quarter and a federal employment tax of including the taxes withheld from all employees of $7,000 during the same quarter. The employer can now keep the $7,000 of federal income tax which in any other case needs to be deposited by the employer and file Form 7200 to request an advance credit on the excessive $2,000.

Alternatively, if the employer paid $6,000 in qualified leave wages to the employees and $7,000 of federal employment tax including the taxes withheld from all employees during a quarter, the employer will not be able to request an advance on the refundable credits by filing Form 7200. Instead, the employer must deposit the excessive amount of $1,000 of the employment taxes within the deadline. The employer also has to account for the retained $6,000 while filing a federal tax return.
 

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