Taxpayers, particularly within the corporate arena, should pay attention to the recent announcement by the IRS. The announcement pertains to the Certified Professional Employer Organizations or CPEOs, which are organizations that have cleared the certification program by the IRS for the same as per a Congressional directive. Companies have an edge when they hire a CPEO for their taxation needs because they get to enjoy better protection.
The assurance that comes with hiring a CPEO
The IRS certification programs impart rigorous training for these organizations in the taxation arena. Businesses hiring these organization can rest assured that they have the full capabilities of an entity with the prowess to be co- employer at their beck and call. The CPEO is capable of acting as the business' financial advisory partner in all respects.
The need for CPEOs
The IRS was prompted by the Congressional directive to impart specialized training to shape CPEO organization following reports of many frauds being committed by PEOs, which were entrusted with the tax filing process of the employees of various businesses. In many cases, the employees' payment toward tax would go into the PEO's coffers instead of being remitted to the IRS. Many such frauds came to light only when the employee came to know of unpaid back taxes.
Sole liability of CPEO
With a view to addressing this issue, in particular, now the CPEOs are being invested with the sole liability of paying payroll taxes to the federal government. This means that if an employee is showing up as a tax evader, it is the CPEO that is taken to task rather than the employee or the business that employs him. This legal liability is sure to curb all instances of fraud where the taxpayer's money is diverted into the CPEO's accounts. Further, to make sure that the IRS can keep track of the activities carried out by the CPEO, there is a requirement for these organization to provide regular reports to the IRS in addition to thorough periodic audits.
So far, 84 PEOs have been certified by the IRS and are ready to take on the responsibility of filing tax on behalf of employees of various businesses. With the additional safeguards in place with CPEOs, it makes sense for businesses to switch to them in future to avoid any problems with tax payments and to ensure that they are not the victim of any tax fraud.