Common errors businesses should avoid when claiming employer tax credits

COVID Tax Tip 2020-157, November 18, 2020

Employers who are filing Form 941, Employer's Quarterly Federal Tax Return and claiming an employer tax credit should read the instructions carefully and take their time when completing the form to avoid mistakes.

Using a reputable tax preparer including certified public accountants, enrolled agents or other knowledgeable tax professionals can also help avoid errors. Mistakes can result in a processing delay or a balance due notice, which could mean a delay or require filing an amended return.

Here are some common mistakes to avoid when completing Form 941:

  • Reporting advances requested instead of the advance payments of credits received.

    If the employer hasn't received the advance payment of credit they requested, it should not be reported on their 941.

  • Incorrectly reconciling the advance payment of the credit requested and received.

    If an employer has received the advance payment requested, they must reconcile it on Form 941 by reporting the advance payments received on line 13f and claiming the credits they're eligible for on lines 11b, 11c, 13c and 13d.

  • Form 7200 is used to request the advance payment of employer credit. It is not used to claim the credit.

    • If employer receives an advance payment of credit, but doesn't report it on Form 941, they may receive a balance due notice.

    • If a taxpayer receives a balance due notice, they will need to file an amended return using Form 941-X to report their advance payments and claim their eligible credits.

      Employers using third-party payers or reporting agents must tell their third-party payer or agent they requested and received an advance payment of credit. These third-party payers and reporting agents should also ask employers if they requested and received an advance payment of credit using Form 7200, Advance Payment of Employer Credits Due to COVID-19

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