Given the economic conditions, many employers may still need to file Form 7200. If you are completing this form for the first time, it can be intimidating. Understanding the tax credits related to COVID-19 can take some time.
At TaxBandits, our goal is to save you time, that’s why we are breaking down the basics of the Form 7200 so that you can file quickly and get back to focusing on your business. Remember, the Form 7200 can be filed at any time until December 31, 2020, so this knowledge will continue to be useful.
Here is some helpful information for completing your Form 7200 for the second quarter.
What is Form 7200?
Form 7200 was created by the IRS in response to the COVID-19 related tax relief that the CARES Act put into place. The Families First Coronavirus Response Act (FFCRA) mandated that all employers with 500 or less employees must provide their workers with paid sick or family leave related to COVID-19.
Under the CARES Act employers are able to reduce their tax deposits to offset the costs of wages provided for qualified employees on sick or family leave. Some employers may make this deduction and still find that they are in a deficit. These employers can request an advance on these credits. The Form 7200 provides a way for employers to make this request.
Who Should File?
First, let’s establish that no employer is required to file this form. However, if you need to request an advance on tax credits, you can file this form as many times as needed. Employers that file the following forms are able to file Form 7200:
Form 941 – Employer’s QUARTERLY Federal Tax Return
Form 943 – Employer’s Annual Federal Tax Return for Agricultural Employees
Form 944 – Employer’s use Form 944, Employer’s ANNUAL Federal Tax Return
Form CT-1 – Employer’s Annual Railroad Retirement Tax Return
How To Complete Form 7200
The Form 7200 has two main portions that must be completed. Initially, employers will need to provide their basic business information including the legal business name, address, and EIN. The filer must indicate the applicable quarter as well.
In Part I there are a few questions that you must answer regarding your employment tax form. Filers will need to indicate if their business is “new” as of January 1, 2020. It will be helpful to have your employee records close by when completing this portion of Form 7200.
Part II of the Form 7200 is where the COVID-19 tax credits are requested. There are 8 lines to fill out in Part II, including:
Total employee retention credit for the quarter.
Total qualified sick leave wages eligible for the credit and paid this quarter.
Total qualified family leave wages eligible for the credit and paid this quarter.
Add Lines 1,2, and 3.
Total amount by which you have already reduced your federal employment tax deposits for these credits for this quarter.
Total advanced credits on previous filings of this form for this quarter.
Add Lines 5 and 6.
Line 8 is completed by subtracting Line 7 from Line 4. The difference between these two values will equal the advanced credits that you should request.
Check out this video to learn more about the TaxBandits filing process for Form 7200!
What Documentation Should You Keep?
The IRS recommends that you keep employment tax records for 4 years. When it comes to COVID-19 tax relief, it is important to keep records and documentation of the qualified sick and family leave wages.
It is also important to keep any documents that helped you determine your eligibility for the employee retention credit. Be sure to keep copies of any Form 7200s that you file during tax year 2020.
The Form 7200 is available now to file for the second quarter. Did you know that you can file your Form 7200 with TaxBandits for only $1.99?
We make keeping your records easy, after you file an IRS tax form with us, you can access and download it anytime you need to! The Form 7200 is available now to file for the second quarter.