www.taxprofessionals.com - TaxProfessionals.com
Posted by BMS

Everything You Need To Know About CPEO Program

Everything You Need To Know About CPEO Program

Certified Professional Employer Organizations or CPEOs has become a serious topic in the world of outsourced Human Resources. You may have heard of CPEO but don’t quite understand what they really are and what makes them important. In this article, we will discuss everything you need to know about CPEO Program.

What’s the purpose of CPEO?

A PEO only becomes certified after applying to the IRS for certification. Once essential information has been provided about its financials and other background information, the IRS will grant CPEO designation. They take on added responsibility with regards to administering payroll and tax reporting and payments on federal employment. They are also responsible for paying federal employment taxes on the wages that are paid to worksite employees. In other words, working with a CPEO will give you added security and peace of mind. But how exactly will this affect your business? Read on to find out.

Co-Employment Relationship Explained

A co-employment relationship is established by CPEO with its customers. Through it, a lot of the employee-relate employer responsibility will be assumed by the CPEO. The customer on the other will continue to manage and run the business. To help better understand the co-employment relationship, we are giving you a quick overview.

The Role of the Company. Your company will remain as an employer and will provide control, maintenance, and management of the day to day tasks and core job functions of the employees as well as keeping up with your organization structure. The leadership team in your company will stay focused on meeting the primary role they were hired for.

The Role of CPEO. The CPEO acts as a co-employer and will perform specific employer obligations as stated in your service agreement. The CPEO is also allowed to provide benefits and take care of functions such as payroll, tax remittance, and related government filings. The CPEO has a greater amount of responsibility because it serves as an employer for those purposes. A Payroll Company is the perfect example for that.

How to become a CPEO?

The process can be quite complicated if you try to have the IRS give you a certification. Not every PEO will also qualify to become a CPEO. Find out if your company meet the following requirements to qualify for the certification:


  • Financial Statement Audits
  • Employment Taxes must be paid in a timely manner and must have a CPA-affirmed documentation of doing so
  • Individual responsible for employment tax payments background reports 


The reason why the IRS wants to carefully take a look at the PEOs they certify is that of the sole responsibility it plays for paying employment taxes on wages paid to worksite employees. In the past, the IRS is only concerned about the client company if the PEO didn’t pay for federal employment taxes. The IRS wants to make sure taxes are paid, to put it simply.

Why is it important?

The law aims to provide more structure to whoever is responsible for what and how eligibility is defined for some tax credits. The law relates to CPEOS and their customers and highlights the following:


  • Payroll Tax Liability
  • Double Payment of Taxes
  • Retaining Specified Tax Credits


How do you apply?

In order to apply for PEO Certification, the IRS designed an Online Registration System for PEOs. You can find the rest of the information and the process at https://www.irs.gov/tax-professionals/certified-professional-employer-organization. 

You will be asked to complete the following application for certification:


  • Individual Identity Verification
  • Responsible Individual Personal Attestation (RIPA)
  • Create a Controlled Group
  • CPEO Application


There are detailed and rigorous quarterly and annual reporting requirements followed as rules to become and maintain status as a CPEO. The IRs and the Treasury Department takes tax compliance of a CPEO applicant or CPEO, it’s responsible individuals, related entities and precursor entities seriously because it is how they determine CPEO applicants or the CPEO’s certification possible material risk when the IRS collects the federal employment taxes. A denial of CPEO certification, or suspension or revocation of CPEO status is expected without quarterly or annual reporting requirements or failing to pay the applicable federal, state, or local taxes, or failure to file required tax or required information returns.

BMS
Contact Member