In a December 4 statement posted on its website, the IRS said that employers will experience a delay in receiving advance payments of credits claimed on Forms 7200, Advance Payment of Employer Credits Due to COVID-19, filed between late-December 2020 and mid-January 2021. The IRS will not process payments during this period because of the end-of-year close out of its systems. The IRS will resume processing payments on January 21, 2021.
Background—Form 7200, generally.
The Coronavirus Aid, Relief, and Economic Security Act (PL 116-136; CARES Act) provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis (the “employee retention credit”).
Under the Families First Coronavirus Response Act (PL 116-127; FFCRA), small employers (500 or fewer employees) whose employees receive paid sick or family leave required by the FFCRA are entitled to credits (the “FFCRA credits”).
Form 7200 is used by eligible employers and small employers to request advance payment of the employee retention credit and the FFCRA credits that an employer claims on employment tax returns such as Form 941, Employers Quarterly Federal Tax Return. (Form 7200, Instructions)
Delay in processing advance payments.
Although the IRS will not process advance payments between late-December 2020 and mid-January 2021, the IRS will continue to accept and process valid Forms 7200 during this period.
The IRS will resume processing advance payments of the employee retention credit and the FFCRA credits on January 21, 2021.
Employers will receive Letter 6312, Form 7200 Response, if their Form 7200 can’t be processed. (Form 6312 is sent to employers when the IRS can’t process Form 7200 due to missing or incorrect information, or if the IRS corrected a computation error on Form 7200 and changed the amount of the advance payment. For more information on Letter 6312, see IRS sending letters regarding delays in employer credit advance payments (07/16/2020)).
To continue your research on refunds and advance payments of excess COVID-19 employee retention tax credits, see FTC 2d/FIN ¶H-4687.5C.
Subscribe to our Checkpoint Daily Newsstand email to get all the latest tax, accounting, and audit news delivered to your inbox each weekday. It’s free!