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.
IRS PEO certification is important because it:
- Confirms the certified PEO (CPEO) can pay federal employment taxes under its EIN.
- Protects customers through the CPEO’s sole liability on wages paid to WSEs by CPEO.
- Provides certainty with respect to when a wage base restart is not necessary for new customers.
- Confirms the CPEO's FUTA credit for all SUTA paid by CPEO or customer.
- Offers clear guidance for the CPEO and the customer on pass-through of tax credits and employment tax exclusions.
- Gives increased comfort for potential client with use of an IRS-certified PEO.
- Lends credibility to PEO business model, especially with investor community and federal regulators.
For general questions about PEO certification, feel free to contact NAPEO General Counsel Farrah Fielder or NAPEO Vice President of Federal Government Affairs Thom Stohler. If you have specific questions about certification and how its specific requirements affect your PEO, you should contact an outside counsel, accountant, or other trusted business advisor.