Employers that outsource their HR, payroll and benefits administration to a Professional Employer Organization (PEO), will have additional protection and benefits with the Small Business Efficiency Act (SBEA). Here’s an overview of how the new law helps companies working with PEOs.
IRS certification provides peace of mind
A voluntary PEO certification program run by the IRS requires a PEO to meet certain financial standards and satisfy reporting obligations. Once certified, the collection and remission of federal employment taxes for worksite employees is the sole responsibility of the PEO.
Legal authority over federal employment taxes
The new law guarantees small businesses that contract with a certified PEO won’t be liable for employment taxes once they remit their employees’ tax withholdings to the PEO. Business owners can rest easy knowing its federal employment tax responsibilities are being met.
Flexibility to join or leave a certified PEO
Switching PEO mid-fiscal year no longer penalizes companies paying taxes under the PEO’s employer identification number (EIN). Their wage base will no longer reset and they will not have to double pay certain taxes.
MidwestHR, located in Chicago, Illinois, is in the process of finalizing certification with the IRS. At that time, we would become a CPEO (instead of PEO). Like always, clients would maintain full control over day-to-day responsibilities without worrying about tax penalty liabilities. Once the CPEO is finalized, clients will have the additional legal security of the SBEA. We look forward to offering current and new clients this added protection for their company. Stay tuned!