Does your business use a professional employer organization (PEO)?
If yes, we suggest that you inquire as to whether your PEO is certified by the IRS. A professional employer organization (PEO) leases its employees to your business. The PEO is then responsible for your employees’ payroll as well as their vacation and sick time.
More importantly, the PEO is also responsible for collecting and paying over your employees’ federal and state tax liabilities. Frequently, your current employees simply become employees of the PEO and continue working for you and your business. In this fashion, the employer enjoys a reduced management workload by allowing the PEO to handle those issues.
But what happens if the PEO does not pay the state and federal taxes related to your employees? If that happens, your business can be held liable for the taxes that should have been paid by the PEO. In an effort to help out businesses that use a PEO, the IRS has launched a new professional employer organization certification program.
A PEO that is certified by the IRS, namely one that meets the written services agreement test and where 85% of the workers performing services for the client company are covered by the written services agreement, then the client company will be relieved of any federal employment tax liability that the PEO may incur.
If you are a business that uses a PEO, it may be advisable to ensure that your PEO is certified by the IRS so that any unpaid federal employment tax liability due to the IRS by the PEO does not sink your business. If your PEO is not certified, you may want to consider finding another PEO that is certified by the IRS.
Do you have an unpaid business liability due to the IRS? Call us, we can help.