The IRS issued a temporary regulation and a proposed regulation for employers to reconcile advance payments of refundable employment tax credits and recapture the benefit of the credits as needed.

The regulations authorize the assessment of erroneous refunds of credits paid under the Families First Coronavirus Response Act and the Coronavirus Aid Relief and Economic Security Act.

In general, the FFCRA requires employers with fewer than 500 employees to provide up to 80 hours of paid sick leave and up to 10 weeks of paid family leave if the employee is unable to work, either at the workplace or remotely, for COVID-19 related reasons.

Eligible employers are entitled to fully refundable tax credits to cover the cost of the leave they are required to pay.

The CARES Act provides an additional credit for employers undergoing economic hardship due to COVID-19.

Eligible employers who paid qualified wages to their workers are entitled to employee retention credits.

Tax Forms

The IRS has revised or is revising its Form 941, Form 943, Form 944, and Form CT-1.

Employers may use these returns to claim the paid sick and family leave and employee retention credits.

Employers may also receive advance payment of the credits up to the total allowable amounts.

The IRS has created Form 7200, for advance payment of employer credits due to COVID-19, which employers may use to request an advance of the credits.

Employers may use these returns to claim the paid sick and family leave and employee retention credits.

Employers are required to reconcile any advance payments claimed on Form 7200 with total credits claimed and total taxes due on their employment tax returns.

Any refund of these credits paid to a taxpayer that exceeds the amount the taxpayer is allowed is an erroneous refund for which the IRS must seek repayment. 

Here is more information on employer tax credits.

In addition, the Connecticut Department of Revenue Services recently issued its own tax guidance for the CARES Act.