What is Form 7200?
This form allows employers to request an advance payment on their tax credits for the following:
Qualified sick leave
Family leave wages
Employee retention credit.
Before requesting advance payment you should reduce your employment tax deposits to account for the credits. You can request the amount of the credit that exceeds your reduced deposits by filing Form 7200. If you use Quickbooks Online or other similar payroll software, there are payroll items that can be set up to automatically track the wages used for credit calculation.
Form 7200 - Step by step
Part I there are two boxes to fill out.
Box 1– Basic business information (business name, address, third party payer details, EIN)
Box 2– Choose the calendar quarter for which you are filing this form. This indicates when the wages were paid.
Part II
Here you will indicate which employment tax form you file and indicate whether you are a new business. You will also report the number of employees that you have.
Part III
This is the portion of the form where you will actually request an advance on your credits.
Line 1– Total employee retention credit for the quarter. Enter up to 50% of the wages for the current quarter, qualified wages may not exceed 50% of $10,000 ($5,000) for any employee for all the quarters. If you paid any qualified wages between March 13, 2020, and March 31, 2020, including 50% of those wages together with 50% of any qualified wages paid during the second quarter for the second-quarter total to enter on line 1.
Line 2– Total qualified sick leave wages eligible for the credit and paid this quarter. Enter the sick leave wages paid as a result of Covid-19 under Emergency Paid Sick Leave Act (EPSLA)
Line 3- Total qualified family leave wages eligible for credit paid this quarter. Enter the wages paid for family sick leave related to Covid-19 for the current quarter.
Line 4– The sum of line 1, 2, and 3
Line 5- Enter the total amount by which you have already reduced your federal employment tax deposits for the quarter.
Line 6– The total advanced credits that you have already requested on previous filings of Form 7200 for the quarter.
Line 7– The sum of lines 5 and 6.
Line 8- Your Advance Payment Request. This amount is calculated by subtracting line 7 from line 4. If the amount is less than zero, you are not eligible to file the form.
If you have any questions about form 7200, please don’t hesitate to reach out to our team. We are here the help.