IRS Issues Form 7200 and Instructions for 2nd Through 4th Quarters of 2021 

3-Minute Read

The IRS has issued a new version of Form 7200, Advance Payment of Employer Credits Due to COVID-19, and the instructions to that form. The new form is to be used for the 2nd through 4th quarters of 2021. The IRS has also warned taxpayers not to use any earlier version of Form 7200 for those quarters. 

Background 

In response to COVID-19, the federal government enacted legislation designed to help employers. These provisions include the employee retention credit (ERC) and paid sick and family leave credits. In March of 2020, the IRS issued Form 7200 so that employers could receive payment of these credits in advance. 

The IRS revised Form 7200 in January 2021 after the Consolidated Appropriations Act, 2021 (CAA) was signed into law, because this legislation extended the ERC and paid sick and family leave tax credits. 

On March 11, 2021, the American Rescue Plan Act (ARPA) was signed into law. It further extends the ERC and paid sick and family leave tax credits. ARPA also added a new COBRA premium assistance credit. 

IRS Issues A New Version of Form 7200  

The IRS has issued a new version of Form 7200 and the instructions to that form, for use for the 2nd through 4th quarters of 2021. 

The instructions note that the credit for qualified sick and family leave wages is available for leave taken before October 1, 2021, and the ERC is available for wages paid before January 1, 2022. COBRA premium assistance is only available for periods of coverage beginning on or after April 1, 2021, through periods of coverage beginning on or before September 30, 2021. However, the COBRA premium assistance credit could be claimed on employment tax returns for the second, third, or fourth quarter of 2021, depending on when the employer (or other person) becomes entitled to the credit. 

Changes to the Form  

As compared to the January 2021 version of Form 7200, the box for “Applicable calendar quarter in 2021” lists only the second, third, and fourth quarters, while the January form listed all four 2021 quarters.  

The following changes were made to Form 7200, Part I (Tell Us About Your Employment Tax Return) 

• Line B no longer asks the filer to indicate whether the business started on or after January 1, 2020. Instead, Line B is used to indicate the total number of employees who were paid qualified wages for the ERC for the applicable quarter. 
• New Line G is used to indicate the number of individuals who received COBRA premium assistance during the quarter the advance is requested. 
• New Line H is used to indicate if the filer is receiving the ERC as a recovery startup business. Under Code Sec. 3134(c)(5), a recovery startup business is one that: (1) began operations after February 15, 2020, and whose average annual gross receipts for a three-tax-year period ending with the tax year that precedes such quarter does not exceed $1 million; and (2) experiences a full or partial suspension of operations due to a governmental order or experiences a significant gross receipt decline.   

Part II (Enter Your Credits and Advance Requested) has been updated to account for COBRA premium assistance provided during the applicable quarter (Line 4). 

Filing Deadlines 

The last day to file Form 7200 to request an advance payment for the second quarter of 2021 is August 2, 2021. The last day to file Form 7200 to request an advance payment for the third quarter of 2021 is November 1, 2021. The last day to file Form 7200 to request an advance payment for the fourth quarter of 2021 is January 31, 2022. 

The last day to file Form 7200 is the same whether the employer files quarterly (on Form 941) or annually (on Form 943, 944, or CT-1). An employer may not file Form 7200 for a quarter after it filed Form 941 for the same quarter. 

No Corrections to Form 7200 

The instructions note that an employer can’t file a corrected or amended Form 7200. For example, if an employer requested an advance payment on Form 7200 and then later learned that some of the wages weren’t qualified wages or the employer is entitled to less of a credit on its employment tax return than expected, the employer can’t file a corrected or amended Form 7200. If the employer made an error on Form 7200, the error will be resolved when the employer claims the credit on its Form 941, 943, 944, or CT-1. 

The IRS warns taxpayers not to use previous versions of Form 7200. While the January 2021 version of Form 7200 states that it can be used for all four quarters of 2021, the IRS has, on a recently issued webpage, instructed taxpayers not to use that version of Form 7200 after the first quarter of 2021. Use of prior versions of Form 7200 for the second, third, or fourth quarter will result in requests for an advance payment of credits being rejected.   

This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.