Optima Tax Relief goes over Common Errors Businesses need to Avoid when Claiming Employer Tax Credits

Employers that are filing Form 941, Employer’s Quarterly Federal Tax Return, and also claiming an employer tax credit should read both forms instructions in order to avoid accidental mistakes.

Another way to prevent making additional errors on these forms is to find a reputable tax preparer, enrolled agent, or someone who is a knowledgeable tax professional.

Optima Tax Relief looks into some common mistakes that need to be avoided when completing Form 941:

  • Reporting advances that are requested instead of the advance payments of credits received. Employers that have not received advance payments or the credit that they have requested should not be reported on the 941.
  • Incorrectly reconciling any advance payment of the credit requested and received. Employers that have received advance payment requests will need to reconcile it on Form 941 by reporting any advance payments received on line 13f and claiming credits that are eligible for on lines 11b, 11c, 13c and 13d.
  • Form 7200 is used is used to request the advance payments of an employer credit. It is important to know that it cannot be used to claim the credit.
    • Employers that receive an advance payments of credit but do not report it on Form 941 may receive a balance due notice from the IRS.
    • Taxpayers that received a balance due notice from the IRS will need to file an amended return using Form 941-X in order to report their advance payments and claim any eligible credits.

Employers that choose to use third party payers or any reporting agents must disclose their third party payer or agent they requested and received an advance payment of credit. Third party payers and reporting agents need to 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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