Form 7200 for Advance Payment of Employer Credits
When you process an Emergency Leave Payment through Square Payroll, a portion of the tax credits are applied immediately when the run is processed by allowing employers to retain the federal payroll tax that would typically be debited and sent to the IRS. The remaining tax credits will be refunded back to you after Square files the quarterly Form 941 and the IRS reconciles the taxes (typically 6 - 10 weeks after the end of the quarter).
Alternatively, if you would like to request an advance payment for the remaining credits from the IRS, you have the option to file Form 7200 outside of Square Payroll. Form 7200 can be filed once or multiple times during the quarter and must be filed in the same quarter in which the emergency leave pay was processed. If you opt to file Form 7200, this information must be reported back to Square Payroll by emailing or calling our Support team.
Note: Form 7200 can be used for multiple tax programs. Square Payroll only supports reporting information from Form 7200 on Form 941 or Form 944 for Emergency Leave Pay types under the Families First Coronavirus Relief Act (FFCRA).
Reporting Information on Form 7200 to Square Payroll
If you opt to file Form 7200, you must report the following information back to Square Payroll by contacting our Customer Success team.
The date you received the advance credit from the IRS.
The credit amount you requested and received. This should align with line 8 on Form 7200.
Did you request credit for the cost of maintaining a qualified health insurance plan? If yes, Square Payroll will not be able to file Form 941 on your behalf and Form 941 will need to be filed outside of Square Payroll.
These amounts from Form 7200 must be reported to Square Payroll by the following dates:
July 1, 2020 for advance credits received between June 1 - June 30, 2020 (Q2 2020)
October 1, 2020 for advance credits received between July 1 - September 30, 2020 (Q3 2020)
January 1, 2021 for advance credits received between October 1 - December 31, 2020 (Q4 2020)
Square will include this information on Form 941 based on the date you received the advance credit from the IRS, not the date the Form 7200 was filed. Failure to report these amounts can result in incorrect tax filings. Additionally, any information submitted after this timeframe may result in the need to file an amended Form 941-X outside of Square Payroll.
Claiming Tax Credit for Health Insurance Costs
Square Payroll does not withhold any voluntary pre-tax deductions, such as health insurance or 401K benefits, on Emergency Leave Payments. Credit resulting from health insurance benefits will not be reported on Part 3 of Form 941.
If you would like to receive a tax credit for the cost of maintaining qualified health insurance plan(s) during the emergency leave coverage period by either requesting these credits on Form 7200 or Form 941, Square Payroll will not be able to file Form 941 on your behalf and the form will need to be filed outside of Square Payroll. If this applies to your business, please contact our Support team by June 25th to opt out of Q2 Form 941 filings.
Filing Form 7200
When filing Form 7200, please ensure the amounts entered match the Emergency Leave wages processed through Square Payroll. Reporting incorrect wage amounts may cause a penalty from the IRS or the need to file an amended Form 941-X outside of Square Payroll. You will need the following information to complete Form 7200:
Employer Info Section: Fill out the applicable fields at the top of the form, which can also be found by going to the Business Info tab in Square Payroll. For the field that states ‘Does a third-party payer file your employment tax return?’, they will need the following:
Third-party payer name: Square Payroll, Inc
Third-party payer’s EIN: 46-5614445
Line A: All Square Payroll employers would check either (1) 941, 941-PR, (quarterly filers) or 941-SS or (3) 944 or 944 (SP) (annual filers)
Line B: If you processed through Square or another provider with your current before 2020, check ‘No.’ Employers with check dates only in 2020, should check ‘Yes.’
Line C: If you selected ‘Yes’ in step B, skip field C. Employers who checked ‘No’ in Part I, C can reference the Q4 2019 Form 941 or 2019 Form 944 which can be found in the Tax Forms tab. Input the number from the ‘Wages, tips, and other compensation’ line item.
Line D: You can find the number of W-2 employees per pay period or quarter by creating an “Employee Totals” report from the History & Reports tab. This number should only reflect W-2 employees, and not include 1099-MISC contractors.
Line 1: Not applicable to FFCRA
Line 2: Add the “Emergency Paid Sick Leave - Self” and/or “Emergency Paid Sick Leave - Others” plus the employers’ portion of Medicare taxes. These can be found under the “Accounting Summary” on an Emergency Leave run(s) on the History & Reports tab. If you provide a qualified health insurance plan, you may need to include the employee and/or employer cost of maintaining health insurance coverage for the employee during the sick leave period. Please reference the official Form 7200 instructions to determine if you should add these costs in line 2.
Line 3: Add the “Emergency Family Leave - Childcare” wages plus the employers’ portion of Medicare taxes which can also be found under the account summary “Accounting Summary.” If you provide a qualified health insurance plan, you may need to include the employee and/or employer cost of maintaining health insurance coverage for the employee during the sick leave period. Please reference the official Form 7200 instructions to determine if you should add these costs in line 3.
Line 4: Add lines 1, 2, and 3
Line 5: Total amount that ER has already reduced federal employment tax deposits for these credits this quarter. For exmaple, the employer scenario given on page 2 of instructions with qualifying credit of $10,000 would record $8,000 on line 5.
Line 6: Total line 8 of all previously filed Form(s) 7200 from the applicable quarter
Line 7: Add lines 5 and 6
Line 8: Reduce line 4 by line 7. If the amount is zero or less, do not file Form 7200.
ThirdParty Designee: You can select ‘No.’ Square Payroll is authorized as your reporting agent.
Signature: The authorized signer for the business should complete this section.
After filing Form 7200 and receiving the credit from the IRS, you must report the following information to Square Payroll: the date you received the credit from the IRS, the credit amount received from line 8 on Form 7200, and if you requested credit for qualified health insurance costs. Square will include this information on Form 941. Failure to report these amounts can result in incorrect tax filings.