ADVANCE PAYMENT OF EMPLOYER CREDITS:
The IRS has published Form 7200, Advance Payment of Employer Credits Due to COVID-19. This new form is for employers who don’t want to wait for Q2 941 filings to claim payroll tax credits when the credits available will be more than the total payroll tax liability due for a given quarter. To refresh, the Emergency Paid Sick Leave Act & Emergency Family and Medical Leave Expansion Act (applicable from April 1, 2020 – December 31, 2020) provides a credit amount that equals
- qualified leave wages paid,
- qualified health care expenses allocable to the employee (to the extent it’s excluded from the employee’s income),
- the employer’s share of FICA taxes on the qualified leave wages.
If you have been skipping deposits of payroll taxes in advance use of the credit, you will simply report those amounts on Form 7200. Your advance payment will then be reduced by these amounts already used and any remaining credit will be refunded.
Although self-employed individuals qualify for both credits, the IRS has mandated individuals cannot file Form 7200.
EMPLOYEE RETENTION CREDIT:
The Employee Retention credit can only be claimed if you did not receive a PPP Loan. To further qualify you must meet one of these criteria. 1) You had your business partially or fully shut down due to government orders during a calendar quarter (all Texas dentists will qualify for Q2 in 2020). Or 2) you meet a “significant decline in revenues” test for a calendar quarter; however, dentists are not likely to meet the test since most practices are experiencing ramped-up demand. The credit amount will equal 50% of wages you pay during a calendar quarter in which you qualify. The maximum credit is 50% of wages paid, limited to $5K per employee. The credit period is March 13, 2020 – December 31, 2020, so if you were shut down partially in March and have not taken a PPP Loan, you will have a Retention Credit available from Q1 to claim. These Q1 credits, along with any Q2 Retention Credit amounts, can be claimed beginning on the Q2 941, or on Form 7200. The IRS will not allow the credits on Q1 941 filings or subsequent Q1 941 amendments.
Form 7200 can be filed with the IRS by faxing it to 855-248-0552. Form 7200 can be filed multiple times a quarter. However, the amounts reported will be cumulative, so your second Form 7200 filing in a quarter will include the amounts reported on the first filing. If any errors are made in the filing of Form 7200, they may be corrected on the Form 941 filing at the end of the quarter.
More info and the Form can be found here: https://www.irs.gov/forms-pubs/about-form-7200