Methods for Claiming Employee Retention Credit for Employers Subject to Closure Due to COVID-19 Crisis

As we continue to unwind and understand the nuances of the Coronavirus Aid, Relief, and Economic Security Act (“CARES” Act), the IRS has issued some additional guidance on the Employee Retention Credit and how to claim the credit.

Understanding the Credit:

Please see Schneider Downs’ previously published Our Thoughts On article that dissects who is eligible for the Employee Retention Credit, how the credit is calculated, and other important details. 

How to Claim the Credit:

1) Reduction of upcoming deposits due with the applicable quarterly employment tax returns (Form 941 for most employers)

a. Starting with the 2nd quarter filings**
b. Forms to be updated prior to 2nd quarter due date to include credit
c. Credit will reduce the amount of the required deposit; if credit is in excess of the required deposit, a refund will be issued

2) Requesting an advance credit by filing Form 7200 (Advance of Employer Credits Due to COVID-19)

a. This form can be used to request the amount of credit that exceeds the necessary employment tax deposit for the quarter instead of waiting for the refund from the quarterly filing
b. The form can be filed at any time before the end of the month following the quarter in which the employer paid the qualified wages
c. If advance credit is requested, there cannot be a reduction to employment tax deposits per quarterly employment tax returns for the same expected credit
d. For additional information, please see the IRS website related to Form 7200 

** On April 3, 2020, the IRS added a note to the Form 941 instructing that regardless of the method, the credit should initially be claimed on the 2nd quarter filing of the employment tax returns.  Wages related to the timeframe before the 2nd quarter begins (March 13, 2020 through March 31, 2020) should be incorporated into the 2nd quarter calculation.  DO NOT INCLUDE any wages or credits relating to the Employee Retention Credit on the 1st quarter employment tax returns.

As a reminder, if an employer receives a loan under the Paycheck Protection Program, then the employer cannot claim an Employee Retention Credit for the same wages.  Also, wages for this credit do not include wages for which the employer can claim a credit for paid sick and family leave under the Families First Coronavirus Response Act or Work Opportunity Tax Credit.

Please contact your Schneider Downs tax advisor if you have any questions or would like to discuss the provisions of the CARES Act and or the Families First Coronavirus Response Act.

Please visit our Coronavirus resource page at schneiderdowns.com/our-thoughts-on/category/Coronavirus for related content.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2020 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on

Treasury Issues Final FDII Regulations
Ohio Sales Tax Holiday 2020
Extension of the Main Street Lending Program
Greasing the Skids: Sell-Side Due Diligence
Use It or Lose It…Maybe: Gift Planning Considerations in an Unpredictable Election Year
Changes to Form 1023, Application for Tax Exemption under Section 501(c)(3)

Register to receive our weekly newsletter with our most recent columns and insights.

Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us

contact us

Map of Pittsburgh Office
Pittsburgh

One PPG Place, Suite 1700
Pittsburgh, PA 15222

contactsd@schneiderdowns.com
p:412.261.3644     f:412.261.4876

Map of Columbus Office
Columbus

65 East State Street, Suite 2000
Columbus, OH 43215

contactsd@schneiderdowns.com
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102