If your business currently outsources human resource management, your provider may soon be certified by the Internal Revenue Service. The IRS certification is voluntary and a part of a new law passed just last year.
The Achieving a Better Life Experience (ABLE) Act of 2014 was enacted on December 19, 2014, as part of the Tax Increase Prevention Act of 2014.
ABLE requires the IRS to set up a program to certify Professional Employer Organizations (PEO). While the IRS had intended to start the PEO certification in January 2015, it’s been moved to July 2016 barring further delays.
The IRS is now requesting information about current PEO industry practices in order to streamline the development of the program.
PEOs are businesses that provide a human resources management service to small businesses. In that capacity, PEOs calculates the tax to be deducted from each employee and sends it to the appropriate agency. They are responsible for payroll, benefits, workers’ compensation and unemployment insurance.
To find a PEO for your business, check with the National Association of Professional Employers Organization.
Of course, there are already organizations that certify PEOs such as the Employer Services Assurance Corporation (ESAC). This a non-profit company that investigates PEOs, making sure they are in compliance with regulatory rules and industry practices.
There is also a $15 million surety bond to back up the PEO against possible missteps. Under the IRS certification, the PEO will be able to assume all fines and obligations incurred by mistakes.
The IRS is looking for feedback to help in setting up its certification program, such as information on financial audits, verification of payroll tax obligations and working capital and net worth requirements.
The IRS is not seeking to duplicate the various requirements imposed by state laws or private assurance programs. Instead, the IRS is requesting information regarding current PEO industry practices, including those followed to comply with applicable state law or private assurance program requirement.
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