In 2014, the Tax Increase Prevention Act passed, requiring the IRS to create a voluntary certification program (CPEO) for PEOs or companies that supply human resource benefits for their client’s workers. The result of this act is an increase in the PEO’s responsibility for complying with federal human resources and benefit rules.
In order for the PEO to be eligible for a CPEO, they must provide:
- CPA Audits
- Employment Tax Payments
- A Surety Bond
- Background Checks
- Client Service Agreements
- An Annual Fee
*A person seeking a CPEO needs to visit the IRS website in order to electronically submit a completed and executed online application. On top of that, each of the CPEO applicants are responsible for electronically submitting a completed and executed online Responsible Individual Personal Attestation (RIPA) form, a FD-258, and a Fingerprint Card. Click here to get informed on the application requirements and here to view links on the sequence of the application process.
But what’s in it for the PEO???
After the cost of the certification requirements, PEOs gain certain benefits in return from the CPEO. A PEO receives a FUTA tax credit, elimination of wage base restarts, statutory recognition, as well as a boost in customer confidence along with much more. To review all the benefits, go to this page.
The IRS’ expectations for a PEO.
In order to remain certified under the CPEO program, CPEOs are required to meet tax status, experience, background, financial reporting, business location, bonding, as well as several other requirements.
According to the Small Business Efficiency Act (SBEA), a certified PEO is required to manage a surety bond representing 5% of the PEO federal employment tax liability, along with a $50,000 minimum value and a $1 Million cap. The two major costs for PEO certification are the cost of an annual external CPA audit and surety bonding. Since surety bonding is one of the two major costs for PEO certification, it is crucial for a PEO to get bonded efficiently. Here at Surety1, our agents will get back to a client within 1-2 business days from the time of application for our lowest price possible for a bond.
For information on application for the CPEO, visit the IRS website page here for eligibility requirements and for directions on how to apply.
At Surety1, we offer competitive premium rates. Give Surety1 a call at 877-654-2327 or visit us online here.