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Form 7200 is a prepayment?


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I hope I have this correct - please advise if not so.

From what I can see, Form 7200 is an advance payment for a credit which is not realized until Form 941 is filed and reconciled. If a taxpayer wants to pay his accountant (or people like us) the time necessary to calculate up to 3 months in advance the amount of the credit and get money back from the IRS for various employer credits, it can be done. But all the payments resulting from 7200 must be paid back when calculating the 941 at the end of the quarter. Correct?
 

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No responses after several views and several days.  I believe this is probably because I asked for responses if my assumption was incorrect.  I believe my assumptions is therefore correct, or I would have heard from someone.

I further believe the credit must be substantial before anyone would jump through the hoops on 7200 just to get an advance 60-90 days ahead of fruition.

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I don't do payroll so really don't know. But it seems that the credit could be larger than current deposits or what will be reconciled on the next Form 941; that reconciling on 941 just means you don't owe with that form or owe penalties for not depositing on schedule. If you need the credit, you don't want to wait another three months or six or... I guess I can see using Form 7200 to get the credit refunded faster. Especially if you've been depositing with every payroll until you realized you were eligible for the credit and now need to get those deposits refunded. Maybe.

I have only one client with employees, and he was using Paychex before he became my client. So, I have no reason to understand new payroll credits, except to remind my client to discuss them with Paychex. If you have clients with employees, I suggest you take a couple classes on ERC and the sick & family leave tax credits.

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No. You do not pay back the credit. You receive the credit. Form 941 is a reconciliation form. Your deposits are on the schedule determined by amounts, etc. If holding your deposits and reconciling on 941 doesn't get your full credit, then use 7200. If you already made deposits instead of holding them, use 7200. Read the instructions to 7200 and the revised 941. Form7200 is to keep more money in your business to pay those employees. You do not pay it back. It's not a loan; it's a credit.

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Refer to the 941 instructions.  It is black and white.

Sending a 7200 means nada.  If one is sent AND money received, then it means something.  Personally, I would not bother sending, as the odds of it getting processed (despite the belief it will processed very timely) is not good.  Better to manage your deposits, and if there are more credits than liabilities, waiting for an eventual refund (don't get me going on using the "apply" option).

I know of someone who faxed it (correctly) the day the current form was made official, and no response form the IRS to date.  The small concern is somehow it eventually gets processed and has to be accounted for in a later quarter.  Of course, that is assuming the employer notices the deposit before getting a nasty gram from the IRS.

As with all IRS transactions, one can no longer assume timely(ish) responses.  The only fiscal beneficial way to manage the process is to manage so there is no refund due (who knows when it may arrive) and to lean towards managing liabilities to the max allowed without penalty, paying them on or near the last allowed date.  Something I have been keen on for decades, using the funds interest free, instead of loaning, interest free, to the IRS while waiting for refunds.

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