February 1, 2021 – The IRS has published a draft update for form 7200 used to request advanced payments of the Employee Retention Credit or qualified sick or family leave credits. Draft instructions for the updated form have not yet been published.
The new form updates the existing form by allowing the taxpayer to select an applicable calendar quarter in 2021, and by adding questions related to the number of employees employed by the business. The Consolidated Appropriations Act of 2021, which extended the ERC into 2021, limits the size of employers eligible to request advanced payments. Section 207(g)(1) of the bill says that only employers who had less than 500 employees in 2019 may request advance payment for the ERC, and claims are also limited based on the average quarterly wages the employer paid in 2019. Larger employers will claim the credit by reducing their payroll tax withholdings or claiming the credit on form 941.
A draft 2021 form 941 was also published by the IRS with no material changes.