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Tax Consequences for Certified Professional Employer Organizations

2019 – 05/24 The IRS has issued final regulations that spell out federal employment tax consequences for certified professional employer organizations (CPEOs) and their customers. Small businesses often contract with these employee leasing companies to ensure compliance with workplace laws and regulations. Typically, the CPEO computes the FICA, withholding tax, worker’s compensation, and 401(k) contributions of each employee and bills the client for the amount. The final regulations adopt the proposed regs with several changes. They include credits for non-worksite covered employees, provisions for self-employed individuals and reporting to the IRS. They also make changes to various definitions.

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