Employee Retention Credit (ERC) Update: Final Instructions and Form 7200 for 2021 Published

Max Shenker
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February 4, 2021 – As of February 4, 2021, the IRS has published final instructions and form 7200, “Advance Payment of Employer Credits Due to COVID-19.” While the new form facilitates an advance credit claim for all four calendar quarters in 2021, the instructions clarify that the credit for qualified sick and family leave wages for wages is only available for the first quarter and the employee retention credit for the first two quarters. The instructions note, “If either or both of these credits are extended, and advance payments are allowed for future quarters of 2021, an update will be posted.” Meaning, the IRS has prepared the form in such a way to avoid revision if the programs are simply extended without changes.

The instructions also clarify that this advance payment mechanism is only applicable to “small businesses” for 2021: “The credit for qualified sick and family leave wages may only be claimed by employers that employ fewer than 500 full-time and part-time employees at the time the leave is taken…. For the employee retention credit, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 limits advance payments of the employee retention credit for 2021 to small employers that averaged 500 or fewer full-time employees in 2019.”

As mentioned in our previous post, new line items have been added to verify these employee counts.

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