In a previous blog post (click here), I generally discussed passage of the Tax Increase Prevention Act of 2014 (“TIPA”) and its overall positive impact on employers who relied on the services of professional employment organizations (“PEOs”) for payroll processing and employment tax payments. Pre-TIPA, many employers were shocked to discover that they remained liable for employment taxes they had dutifully turned over to a PEO to pay to the IRS on their behalf. TIPA attempts to alleviate much of this unfairness and absolves employers of employment tax liability in these instances—with one catch: the employer must utilize the services of a certified PEO (“CPEO”).
A PEO becomes certified through submitting an application and fee, among other things, to the IRS. A certified PEO receives a notice of certification and its name is published on the IRS’s website at www.irs.gov/CPEOs (although the web address is currently not functional, it will presumably reflect the first round of CPEOs shortly). Although TIPA was passed in 2014, the IRS has only recently indicated its intent to begin reviewing and accepting applications for PEO certification on and after July 1, 2016. With the certification process now open, employers would be wise to inquire from their current PEO whether it is seeking or plans to seek certification under the IRS’s program. Those employers who do not may eventually do so at their own peril.