May an employer receive a cash advance on the ERTC and the FFCRA tax credits by filing IRS Form 7200?

Posted by: Bonita Hatchett-Bodle    Apr 22, 2020 12:41:48 PM

Yes. Employers may receive an advance payment of tax credits if the employer’s employment tax obligation is less than the amount of the FFCRA tax credit and the ERTC to which the employer is entitled. Eligible employers should first reduce their quarterly employment tax deposits to account for the tax credits. Thereafter, an employer may request payment of an amount determined by subtracting the employment tax liability from the available tax credits. In the event the employment tax liability is less than the tax credits, the employer may use Form 7200 to request a refund of the excess. Alternatively, the employer may wait to obtain the refund until the employer claims the tax credits on the employer’s annual tax return.

As an example, the IRS instructions to Form 7200 provide that if an employer is entitled to an ERTC of $10,000 and was required to deposit $8,000 in employment taxes, the employer could retain the entire $8,000 of taxes as a portion of the refundable tax credit to which the employer was entitled and file a request for an advance payment for the remaining $2,000.

Topics: FFCRA tax credit, advance tax credit, ERTC tax credit, IRS Form 7200