Trinet Receives Certified Peo Approval From The Irs
Once accredited, ESAC provides surety bonds to protect the payment of wages, payroll taxes, employee benefits, and insurance premiums for employers. Gaining an ESAC accreditation requires compliance in more than 40 industry best practices. The goal here is to hold PEO’s accountable for financial stability, ethical business practices, and adherence to regulatory requirements. The agency focuses on both state and federal regulations when going through its approval processes to ensure that only the most thorough PEO groups are recognized as trustworthy service providers. ATA Employment Solutions, a PEO firm based in Union City, TN, is proud to announce that they have been officially re-certified as a Certified Professional Employer Organization .
This means that the I.R.S. cannot go after a client to collect any unpaid payroll taxes. Additionally, if a company doing business with a CPEO pursuant to a CPEO contract or agreement leaves the relationship, it would benefit from the successor employer status and not have to restart the wage base for employees for purposes of federal employment taxes. Essentially, it might provide you further peace of mind when working with a certified professional employer organization. PrestigePEO holds the highest attainable industry standards in accreditation. Our ESAC accreditation and our CPEO and CI certifications guarantee your business financial security with surety bonds that help protect the payment of wages, payroll taxes, employee benefits, and insurance premiums. According to the National Association of PEOs, professional employer organizations help their clients grow at higher rates and position them to have strategic advantages over businesses that don’t. With careful consideration and proper due diligence, PEOs can be a very powerful partner for your business.
What does a PEO offer?
A PEO is a company that you can outsource your business’s payroll and HR tasks to. PEOs can run payroll, pay taxes, maintain workers’ compensation insurance, and provide benefits. Your employees are listed under the PEO for tax purposes, making the PEO a co-employer.
Let’s say a small business hired a PEO, paid the invoice, which would have included the employment taxes, and the PEO didn’t pay the employment taxes. Before the SBEA, the IRS could have gone after the client company for the taxes – money that the company thought it had already paid to the PEO. The IRS wants to take a good look at the PEOs it certifies because they’re solely responsible for paying employment taxes on wages they pay to worksite employees. Previously, the IRS could have looked to the client company if the PEO did not pay the federal employment taxes. The assertion must be signed by a responsible individual under penalties of perjury stating that the CPEO applicant has withheld and made deposits of all federal employment taxes as required for the quarter. The examination level attestation must come from a CPA stating that this assertion is fairly stated. Employee leasing in the United States began in the late 1960s by three businessmen, Eugene Boffa, Louis Calmare, and Joseph Martinez.
The IRS’s rigorous background checks and quarterly financial reporting requirements ensure CPEOs remain in good standing for the life of the business. With a CPEO, you know with high confidence your employer taxes are processed accurately and timely, which minimizes your exposure. When the PEO invoice is paid, the tax obligation to the IRS has been fulfilled. Partnering with an accredited PEO helps ensure reliability of the service provider. Accreditation requires compliance with more than 40 industry best practices and quarterly verification of all key employer payments, including federal and state employment taxes, health and workers’ compensation premiums, and retirement plan contributions. Less than five percent of the industry has achieved this proven level of reliability.
Ncci Impact On Peos
A professional employer organization is an outsourcing firm that provides services to small and medium-sized businesses . The PEO enters into a contractual co-employment agreement with its clientele. Through co-employment, the PEO becomes the employer of record for tax purposes through filing payroll taxes under its own tax identification numbers. As the legal employer, the PEO is responsible for withholding proper taxes, paying unemployment insurance taxes and providing workers’ compensation coverage. A professional employer organization —sometimes referred to as an employee leasing company—enters into an agreement with a client to perform some or all of the federal employment tax withholding, reporting, and payment functions related to workers performing services for the client. The terms of a PEO arrangement typically provide that the PEO is the employer (or “co-employer”) of the client’s employees and is responsible for paying the employees and for the related federal employment tax compliance. Engage PEO delivers comprehensive HR solutions to small and mid-sized businesses nationwide, sharpening their competitive advantage.
Comprised of the industry’s most respected veteran professional employer organization executives, certified HR professionals and attorneys, Engage PEO provides hands-on, expert HR services and counsel to help clients minimize cost and maximize efficiency for stronger business performance. The company’s superior service offering includes a full range of health and workers’ compensation insurance products, payroll technology and tax administration, risk management services and advanced technology as part of an extensive suite of HR services.
- As the legal employer, the PEO is responsible for withholding proper taxes, paying unemployment insurance taxes and providing workers’ compensation coverage.
- A professional employer organization is an outsourcing firm that provides services to small and medium-sized businesses .
- The PEO enters into a contractual co-employment agreement with its clientele.
- A professional employer organization —sometimes referred to as an employee leasing company—enters into an agreement with a client to perform some or all of the federal employment tax withholding, reporting, and payment functions related to workers performing services for the client.
- The terms of a PEO arrangement typically provide that the PEO is the employer (or “co-employer”) of the client’s employees and is responsible for paying the employees and for the related federal employment tax compliance.
- Through co-employment, the PEO becomes the employer of record for tax purposes through filing payroll taxes under its own tax identification numbers.
Choosing towork with a Certified PEO provides the same business benefitsas a non-certified PEOs, but with the added financial assurance regarding the proper remittance of payroll taxes. This means that if a non-certified PEO fails to pay a clients’ payroll taxes, the I.R.S. can go after the client for taxes owed, even if the client has already remitted the payroll taxes to the PEO. This places a great deal of financial risk on a client, who may not be aware of any unpaid taxes or penalties until the I.R.S. sends a notice and a bill. The ground work for CPEOs came in late 2014, when the Small Business Efficiency Act became law and provided federal recognition of PEO services. The SBEA required the IRS to create a voluntary certification program for PEOs, a major first for the industry. You may be familiar with the idea of a Professional Employer Organization, also known as a PEO, but have you heard of a CPEO?
The concept was popularized by Marvin R. Selter, who leased the employees of a doctor’s office in Southern California. The Employee Retirement Income Security Act of contained an exemption for multiple employer welfare arrangements , which provided a loophole for employers with leased employees to claim they were exempt from the ERISA requirements.
A certified PEO is a Professional Employer Organization that has met the rigorous background, financial, and reporting requirements set by the IRS. Certification ensures financial protections and tax benefits to clients of a certified PEOthat clients of non-certified PEOs do not necessarily have. Under the SBEA, it’s clear that if you’re a CPEO customer subject to a CPEO contract, the wage base no longer starts over. The CPEO gets to succeed to the wage base of the employees at a customer coming into the relationship, so there’s no longer a double payment of taxes. While there are a lot of other meanings to the term “successor employer,” a CPEO would only be the successor employer with regard to the wage base for payment of employment taxes. The IRS has traditionally taken the view that in a PEO arrangement, both the PEO and the customer are jointly and severally liable for paying federal employment taxes.
The PEO industry is highly regulated by the government and the IRS certification is another factor that sets it apart from the traditional staffing industry. The PEO industry is very unique in that the employees are employed by the client with the client able to receive available tax credits while the employees receive the benefits of being a part of a much larger employee pool.
The SBEA ruling does not change how a PEO will interact with clients or which services may be offered. It simply provides official recognition of the PEO and provides some tax benefits. Bonding – The applying PEO must submit to the IRS proof of the greater between a $50,000 bond or a bond equal to 5 percent of the firm’s federal employment tax liabilities for the previous year. This verification needs to be submitted within 30 days of the notice for certification. If the PEO meets all the other requirements but fails to provide proof of bonding, certification will not be granted. What separates a CPEO from a non-certified PEO is that aCPEO provides clients with financial peace of mind by minimizing financial liability. When dealing with anon-certifiedPEO, the IRS views that both the PEO and the client are jointly liable for the payment of payroll taxes.
Financial protection is provided by more than $15 million in surety bonds held in a national bank’s trust as a guarantee for accredited PEO clients and their employees. As a certified professional employer organization, not only do we have the IRS’ certification, but we also partner with industry-leading companies to bring you competitive plans and provide time-saving services that help you recruit and retain the best employees. The Small Business Efficiency Act of 2014 put things in motion when it set out to clarify the relationship between a certified professional employer organization and its customers for the purpose of federal payroll taxes. It is federal recognition that the PEO industry has needed since its early days more than 30 years ago.
Why Is It Important For A Peo To Be Certified And Accredited?
To remain compliant, a CPEO maintains extensive records and provides the IRS with ongoing independent financial reporting. The complexity and strictness of the program are evident as there only being two CPEO’s in the state of Tennessee with ATA Employment Solutions being the only one in west Tennessee. The working relationship a business has with a PEO will remain virtually unchanged.
The Tax Increase Prevention Act of 2014, enacted Dec. 19, 2014, requires the IRS to establish a voluntary certification program for professional employer organizations . PEOs handle various payroll administration and tax reporting responsibilities for their business clients and are typically paid a fee based on payroll costs. The SBEA makes it very clear that a CPEO, certified by the IRS, is solely liable for the payment of federal employment taxes on wages it pays to worksite employees. So once the customer pays the invoice, which includes the federal payroll taxes, to the CPEO, the IRS can’t come back to the customer to collect employment taxes if the customer is subject to a CPEO service contract or agreement. As part of the industry’s self-regulation efforts, an independent accreditation body, the Employer Services Assurance Corporation , was formed in 1995. ESAC verifies accredited PEOs’ compliance with important ethical, financial, and operational standards and provides financial assurance of the performance of key employer obligations by these PEOs. This financial assurance is backed by over $15 million in surety bonds and assures PEO clients, employees, insurers and government authorities that accredited PEOs are meeting their contractual and fiduciary responsibilities.
In 2016, Engage PEO was named 127th on Inc. magazine’s list of the 5000 fastest growing companies. To become and remain certified under the new program, CPEOs must meet tax compliance, background, experience, business location, financial reporting, bonding, and other requirements. Certified PEOs take on additional responsibilities with regard to payroll administration and federal employment tax reporting and payments of their clients. They accept the additional auditing of financials and operational information in order to obtain the designated CPEO status.
One service provided by a PEO is to secure workers’ compensation insurance coverage at a lower cost than client companies can obtain on an individual basis. Essentially, a PEO obtains workers’ compensation coverage for its clients by negotiating insurance coverage that covers not just the PEO, but also the client companies. This is allowed because, legally, the PEO is the employer of the workers at the client companies.
In most situations, however, the employees working in the client’s business are the common law employees of the client for federal tax purposes, and the client is therefore legally responsible for federal employment tax compliance. Some Wage Base Tax Restarts Eliminated – Due to the successor employer status of CPEOs for federal payroll taxes, clients that contract with them will not be subject to double taxation from the Federal Insurance Contributions Act or the Federal Unemployment Tax Act . As mandated in theSmall Business Efficiency Act – which created the PEO certification program –a CPEO is solely liable for federal employment tax payments.
Passage of the Tax Equity and Fiscal Responsibility Act of further encouraged employee leasing by providing a tax shelter for employers who contributed a minimum amount to employee plans. More stringent guidelines in the Tax Reform Act of 1986 later eliminated most of the TEFRA incentive, however.
Confirmation Of Tax Credits
The U.S. Treasury Department and IRS today released for publication in the Federal Register final regulations (T.D. 9860) concerning the requirements for a certification program for professional employer organizations—“certified professional employer organizations” or CPEOs. The IRS does not endorse any particular certified professional employer organization. For more information on certified professional employer organizations go to This designation was part of the federal regulatory environment for PEOs created by the Small Business Efficiency Act. For more information on certified professional employer organizations, go to The creation of the IRS’s PEO certification program formally codified PEOs within the tax code and recognized the key role PEOs play in helping small businesses grow and thrive. This voluntary certification program provides added assurance to small business owners who want to turn to a PEO to handle their employment tax issues and back office administrative and HR tasks.
One of the top liability concerns for PEO clients is that they can be held legally responsible by the IRS for required tax deposits even if nonpayment was their PEO’s fault. Clients of a CPEO are not held liable for unpaid federal employment taxes once they remit their employees’ tax withholdings to the CPEO. In addition to being a certified professional employer organization and a member of NAPEO, Genesis HR Solutions has been accredited by the Employer Services Assurance Corporation since 1996. Our ESAC accreditation means we recognize the risk of liability in a co-employment relationship, and with us, you’re safe. Certification affects the employment tax liabilities of both the CPEO and its clients. A CPEO is generally treated as the employer of any individual performing services for a client of the CPEO and covered by a CPEO contract between the CPEO with the client, but only for wages and other compensation paid to the individual by the CPEO. If the newly established CPEO applicant does not have a precursor entity, it must provide a copy of the annual audited financial statements for the most recently completed fiscal year of any related entity described in § 301.7705-1T.
It is important that a CPEO applicant or CPEO be managed by individuals with knowledge or experience regarding federal and state employment tax compliance and business practices relating to those compliance requirements. The IRS reserves the right to ask a CPEO applicant to support its representations with respect to its knowledge or experience of its responsible individuals, by providing a written work history or third-party references. Section 301.7705-1T provides the technical definition of a provider of employment-related services for purposes of the CPEO program.
Our HR expertise and HRIS software assist business owners at critical points throughout the employee lifecycle, from recruitment to retirement. Businesses that partner with a PEO grow 7 to 9% faster, and are 50% less likely to go out of business . XcelHR is a nationwide PEO which services hundreds of clients and thousands of worksite employees in the fifty states of America. When dealing with a non-certified PEO, the IRS views both the PEO and the employer jointly liable for the payment of payroll taxes. The groundwork for the CPEO designation came in late 2014, when the Small Business Efficiency Act became law and provided federal recognition of PEO services. Once in place, the SBEA required the IRS to create a voluntary certification program for PEOs.
Instead, the CPEO becomes a successor, preventing the client from having to pay these taxes twice. This accreditation proves a PEO’s financial stability, ethical business practices, adherence to regulatory requirements and provides surety bonds that help protect the payment of wages, payroll taxes, employee benefits and insurance premiums. A PEO also may manage human resources, employee benefits, workers compensation claims, and unemployment insurance claims for the client. The client typically pays the PEO a fee based on payroll costs plus an additional amount.
In general, this type of related entity is a provider of employment-related services that is related to the newly established CPEO applicant because of the common ownership of a responsible individual. Beginning or ending a PEO relationship mid-year can trigger a double tax payment for companies. With a CPEO, the taxes paid on the previous federal employer identification number will carry over. When clients begin or end a relationship with a CPEO, they are not required to restart federal payroll wage bases.