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IRS Stamp of Approval for PEOs

May 19, 2016

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benefitsbclp

IRS Stamp of Approval for PEOs

May 19, 2016

by: benefitsbclp

CertifiedSmall 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

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PEOs: A remedy for ACA reporting requirements?

January 21, 2016

Authors

benefitsbclp

PEOs: A remedy for ACA reporting requirements?

January 21, 2016

by: benefitsbclp

IRS AheadSigned into law in December 2014 and effective January 1, 2016, the Small Business Efficiency Act (“SBEA”) provides welcome federal statutory recognition of Professional Employer Organizations (“PEOs”). PEOs, who act as “co-employers”, are becoming popular for many small to mid-size businesses struggling to maintain compliance with an ever-increasing volume of regulations impacting human resources and benefits compliance.

In the past, many states individually recognized PEOs through licensing or registration statutes, and there were only a handful of pieces of federal guidance concerning how PEOs should be treated under federal law. The SBEA changes the federal legal landscape by instituting a voluntary certification process for PEOs. By completing this voluntary certification process, a PEO has clear statutory authority to collect and remit taxes on behalf of their clients. Businesses can breathe a sigh of relief as certified PEOs will also assume sole liability for the collection and remission of federal taxes.

In order to become certified, the SBEA requires PEOs to meet a number of financial standards, including bonding and independent financial audit requirements. The IRS has been working to determine the exact procedures and information system changes necessary to implement the new law, and the window for submitting comments on this process just closed earlier this month. At this point, it seems aggressive, but the IRS claims that it will begin accepting applications for certification on July 1, 2016 (only a year

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