Your business is facing many challenges and changes right now due to COVID-19. That’s why the TaxBandits team is dedicated to bringing you the information you need to make the IRS filing decisions that are best for your business. For example, you may benefit from filing the Form 7200.
Why does Form 7200 exist?
The Form 7200 is a fairly new IRS Tax Form. It was created and released back in April following the implementation of the CARES ACt. Here is a little background information.
The Coronavirus Aid, Relief, and Economic Security Act was passed into law officially on March 27, 2020. This legislation was designed to maintain balance in the economy despite the drastic decline caused by the Coronavirus outbreak.
The CARES Act provided employers with refundable tax credits to offset the economic impact of COVID-19. The 3 types of tax credits that employers can take advantage of are:
The Qualified Family Leave Credit
To be eligible for this tax credit, employers with 500 employees or less must provide their employees with the option to take time off from work when they are caring for a family member that is affected by COVID-19.
The Qualified Paid Sick Leave Credit
To be eligible for this tax credit, employers with 500 or less employees must provide up to 80 hours of paid sick leave when their employee is unable to work either because they are experiencing COVID-19 or caring for a family member that is infected and thus they are self-quarantining themselves.
The Employee Retention Credit
This tax credit offers a 50% refund on wages paid totaling $10,000, it is designed for employers that have dramatically reduced revenue due to COVID-19. The purpose of this program is to encourage employers to keep their employees on the payroll, qualified wages may not exceed 50% of $10,000 ($5,000) for any employee for all quarters.
Employers can request an advance on these tax credits, to do so they must file Form 7200.
Why File Form 7200?
Let’s start this out with a quick disclaimer, the Form 7200 is not a mandatory form, no business owner is required to file this form. So, why would you choose to file this form? Here’s why.
To speed up the process and grant employers more immediate economic relief, employers can reduce their tax deposits to cover the qualified wages paid to employees on sick or family leave.
Employers who are eligible and choose to claim these credits will later report the information to justify their tax deductions on their Form 941.
However, if an employer has to pay out wages to employees for paid or sick leave and the amount is greater than their tax deposits, the Form 7200 allows employers to request an advance on these credits.
Basically, filing this form allows employers to speed up the tax relief process and helps to bridge the financial gap for businesses facing economic hardship.
How does the Form 7200 work?
So, here’s the next question we keep hearing from our clients. Once you understand what this form is, you will naturally wonder what the process for filing this form and how long it will take. First of all, this form can be filed as needed throughout the quarter, there isn’t a limit.
When it comes to completing this form you will need to know the qualified paid time off for sick leave and family you have paid out. You will also need to know your total employee retention credit for the quarter so far.
You will need to indicate how much you have reduced your tax credits during the current quarter. This form must be submitted to the IRS by fax.
Once the IRS receives your form, they will begin to process your request. The IRS doesn’t currently have a set time frame for receiving advanced tax credits, but the sooner you submit this form correctly, the sooner the IRS can fulfill your request.
File Form 7200 with TaxBandits
There is no need to putter around in your basement in search of your ancient fax machine, just file this form with TaxBandits!
With no hidden or annual fees you can easily complete your Form 7200 for a reasonable price, only $1.99 per form. Our software will guide you through the form for a quick and easy experience. You will also have access to our excellent support team while you file, they are standing by to assist you via phone, email, and live chat.
Check out this video for a walk through the Form 7200!