May 19, 2016
Authored by: benefitsbclp
Small businesses struggling to maintain compliance with the constant flow of regulations impacting human resources and benefits compliance have increasingly turned to professional employer organizations (“PEOs”) to serve as payroll agent or, in some circumstances, co-employer of their employees. On May 4, 2016, the IRS released temporary and proposed regulations that implement a new voluntary certification program for PEOs.
The application process for becoming certified will open on July 1st. A revenue procedure further detailing the application process will be released in next several weeks, after which time the IRS will publish lists of certified PEOs (CPEOs). The IRS welcomes public comment on these regulations – the deadline for submissions is August 4th.
Requirements to become a CPEO appear quite demanding. A PEO applicant along with the PEO’s “responsible individuals” (including certain owners, directors, officers, and individuals with ultimate responsibility for managing the PEO) must submit an application to the IRS and satisfy certification requirements.
In addition to satisfying the certification requirements, PEOs must meet these requirements on an ongoing basis after becoming certified. If they do not, a CPEO may have their certified status revoked or suspended, in which case the IRS will make this information available to the public and the CPEO will have to notify their clients.
To submit an application, a PEO applicant must permit the IRS to investigate its statements and submissions. Each of the PEO’s