In a recent announcement of its first class of Certified Professional Employer Organizations (CPEO), the IRS awarded only 84 PEOs across the country with the new CPEO designation. LBMC Employment Partners is pleased to be among the first group of providers in the nation to be awarded this honor.
About the CPEO Program
The CPEO program was first introduced by the IRS in late 2014, issuing notices to PEO providers across the nation who have met the background, experience, financial reporting, and other application requirements on May 31, 2017. Under this program, regulations formally specify who assumes liability for federal taxes in the relationship between CPEO service providers and their clients. The ongoing compliance measures required to maintain the status of a CPEO are also significant.
Companies who hire a CPEO provider will enjoy the additional assurance that is associated with a PEO provider with the designation. Ultimately, the CPEO statute should provide more consumer confidence for any business owner or officer considering a co-employment relationship and permit CPEO service providers to perform as the industry leaders that they have proven to be.
The Differences Between a CPEO and a PEO
For employers who use a PEO for outsourcing employee management tasks, such as payroll, tax payments, employee benefits, and workers’ compensation, it’s important to understand the difference between a CPEO and a PEO.
With the PEO essentially being the employer of record, it is responsible for filing federal taxes on clients’ employees under the PEO tax ID number. Reports of fraud were alleged as a result of some PEOs collecting the clients’ federal payroll taxes but failing to remit the payments to the IRS. The client company would not be aware of the fraud until it heard it from the IRS — usually many months later. Similar fraud instances have occurred with health benefits. The client company was still responsible for the federal payroll tax payments, not the PEO. The CPEO designation changes that for clients who opt to sign a CPEO client service agreement.
PEO companies who maintain the new IRS CPEO designation offer a greater peace of mind as the IRS also requires ongoing reporting, bonding, and audits by the CPEO to assure all employment tax payments are being made as needed. A CPEO may also enjoy certain tax credits on behalf of its clients, and CPEO clients continue to be eligible for various employment-based federal tax credits.
LBMC EP’s CPEO Designation
LBMC Employment Partners meets the strict auditing and reporting standards of the Small Business Efficiency Act (SBEA) and will assume financial responsibility for federal employment tax payments for its eligible clients’ worksite employees. Additionally, federal payroll tax liability payments will also be guaranteed under LBMC EP’s posted surety bond as added protection.
The CPEO certification is voluntary, however, LBMC EP wanted to pursue the new designation to prove its commitment to operate at the highest standard.
The IRS does not endorse any particular certified professional organization. For more information on certified professional employer organizations, go to www.irs.gov.
Read more: The Tennessean
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