Question #65:
If a common law employer uses a third-party payer for only a portion of their workforce, should the employer list the third-party payer on the Form 7200?
Found under the M. Special Issues for Employers: Use of Third-Party Payers section of the Employee Retention Credit (ERC) IRS Notice 2021-20 with updated guidance to help business owners follow the current ERC rules.
The answer to question #65, If a common law employer uses a third-party payer for only a portion of their workforce, should the employer list the third-party payer on the Form 7200?, can be found below.
ERC IRS Notice 2021-20 Question #65:
M. Special Issues for Employers: Use of Third-Party Payers
If a common law employer uses a third-party payer for only a portion of their workforce, should the employer list the third-party payer on the Form 7200?
In some cases, a common law employer may use the services of a third-party payer (such as a CPEO, PEO, or other section 3504 agent) to pay wages for only a portion of its workforce. In those circumstances, the third-party payer files a federal employment tax return for the wages it paid to the common law employer’s employees under its name and EIN , and the common law employer files a federal employment tax return for wages it paid directly to employees under its own name and EIN.
If the common law employer is claiming advance payments of credits for both wages paid directly to employees that will be reported on its own federal employment tax return and wages paid to other employees by a third-party payer that will be reported on the third-party payer’s federal employment tax return, two separate Forms 7200 should be filed: one for the wages paid by the common law employer with the name and EIN of the common law employer, and one for the wages paid by the third- party payer with the name and EIN of both the common law employer and the third- party payer.
To help expedite and ensure proper processing of Form 7200 and reconciliation of advance payment of the credits to the federal employment tax return when a common law employer uses a third-party payer such as a CPEO, PEO, or other section 3504 agent for only a portion of its workforce, a common law employer should include the name and EIN of the third-party payer only on the Form 7200 for advance payment of the credits for wages paid by the third-party payer and reported on the third-party payer’s federal employment tax return. The common law employer should not include the name and EIN of the third-party payer on the Form 7200 for advance payments of the credits claimed for wages paid by the common law employer and reported on the common law employer’s federal employment tax return.
For more information about the Employee Retention Credit (ERC) IRS Notice 2021-20, visit the Internal Revenue Service (IRS) Department of the Treasury, official IRS.gov tax website.
Conclusion and Summary on If a common law employer uses a third-party payer for only a portion of their workforce, should the employer list the third-party payer on the Form 7200? – #65 ERC IRS Notice 2021-20
The answer to Question #65: “If a common law employer uses a third-party payer for only a portion of their workforce, should the employer list the third-party payer on the Form 7200?” was answered in detail above. It was found under section “M. Special Issues for Employers: Use of Third-Party Payers” in IRS Notice 2021-20.
Leave a comment below if you have further questions on the Employee Retention Credit (ERC) or for clarifications on If a common law employer uses a third-party payer for only a portion of their workforce, should the employer list the third-party payer on the Form 7200?
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