IRS Delays Start of Voluntary Certification Program for PEOs

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A program to certify professional employer organizations was delayed one year, with the Internal Revenue Service accepting applications starting July 1, 2016, the agency said Aug. 5.

The voluntary certification program was to have started July 1, 2015, under the Tax Increase Prevention Act, which took effect Dec. 19, 2014. PEOs provide workers to a business interested in outsourcing some of its management tasks, including wage payments and collecting and paying employment taxes.

As part of the program to become certified, organizations must pass background, credit and tax compliance checks; have an approved surety board; meet financial standards; and satisfy reporting obligations.

The IRS is to publish a list of certified organizations and organizations that have had certifications revoked or suspended.

Trying to Identify, Define Policy

With the enactment of the Tax Increase Prevention Act, the IRS said it has been “working steadily to identify and define the policy, procedural, and information system changes necessary to meet the requirements of the new law.”

“Meeting these requirements, and doing so in a way that balances customer service with the interests of tax administration, will take additional time and resources,” the agency said.

The IRS did not return a request for a comment from Bloomberg BNA about why the implementation of the program was delayed.

Professional employer organizations take on payroll functions, benefits administration and recruitment as outsourced by client employers. The PEOs do this by hiring workers for client employers and becoming the legal employer for tax and insurance purposes.

Client employers pay the organization the overhead costs of employees, along with a service fee. In exchange, the professional employer organization manages the human resource functions with greater expertise and at a lower cost.

To contact the reporter on this story: Caitlin E. Reilly at

To contact the editor responsible for this story: Michael Trimarchi at

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