3 Pros of Joining a Certified PEO (CPEO)
In 2016, Congress passed a bill that allowed Professional Employer Organizations (PEOs) to be certified by the IRS, an act that clarified some grey areas on the power and roles of PEOs and the employer regarding wage-base restart and liability. Here are some benefits of joining one of these new CPEOs:
1. Maintain typical employer tax credits
The Small Business Efficiency Act ensures that businesses in a CPEO co-employer relationship can maintain specific tax credits. These tax credits include:
- IRC sec. 41 credit for increasing research activity
- IRC sec. 45R credit for health insurance expenses
- IRC sec. 51 work opportunity credit
- IRC sec. 1396 empowerment zone employment credit
2. No liability for Payroll Tax
A CPEO takes on sole liability for paying federal employment taxes. The customer only pays the invoice—which includes the federal payroll taxes—to the CPEO. This makes it so the IRS cannot go back to the customer to collect taxes; it must go to the CPEO.
3. Wage-base Restart
When joining or leaving a CPEO relationship, employers no longer need to worry about paying double taxes. The CPEO would be a “successor employer” when a business joins a contract and will succeed the employees’ wage bases.
There are still some hidden restarts and taxes with State Unemployment, FSAs, medical deductibles and EPLI to consider. Would your business benefit from joining a PEO or a CPEO? Schedule a consultation with Cambridge today to learn more.