The IRS has released a revised draft version of Form 7200[1] to be used to obtain a refundable payment of the employee retention credit and the qualified sick pay and family leave credit. The revisions include the first guidance on how employers will claim the advance employee retention credit for 2021.

The Taxpayer Certainty and Disaster Relief Act of 2020 §207(g)(1) revised CARES Act §2301(j)(2)(A) to provide for an advance payment of the employee retention credit to employers who did not employ more than 500 employees in 2019. The maximum credit is set at 70% of the employer’s average wages in 2019. A special rule allows for a modified computation for seasonal employers.[2]

The revised Form 7200 has added the following question E to Part I of Form 7200:

If you’re requesting an advance payment of the employee retention credit (Part II, line 1), enter the average number of full-time employees you had in 2019 (or 2020 if your business wasn’t in existence in 2019). Aggregation rules apply.[3]

Similarly, line 1 of Part II, where the amount to be paid to the employer is computed, now contains the following line providing for the amount of employee retention credit an employer will claim:

Total employee retention credit for the quarter. Don’t enter more than the amount eligible to be advanced for the quarter. See instructions.[4]

Unfortunately, the IRS did not release the draft instructions at the same time as they released the form. But the draft form does now clarify how the advance employee retention credit will be claimed by employers looking to take advantage of the provision.

[1] Draft Form 7200 (Rev. January 2021), January 28, 2021, https://www.irs.gov/pub/irs-dft/f7200--dft.pdf (retrived January 29, 2021)

[2] CARES Act §2301(j)(2)(B) as amended by Taxpayer Certainty and Disaster Relief Act of 2020 §207(g)(1)

[3] Draft Form 7200 (Rev. January 2021), January 28, 2021

[4] Draft Form 7200 (Rev. January 2021), January 28, 2021