Passage of Small Business Efficiency Act (SBEA) Good News for Small Employers

On December 19, 2014, the Tax Raise Prevention Act of 2014 was signed into law. This incorporated the enactment of the Compact Business enterprise Efficiency Act (SBEA), which amended the Internal Income Code to establish a certification system for Specialist Employer Companies (PEOs).This certification system need to eradicate particular issues employers may possibly have about partnering with a PEO.

What Does the SBEA do?

In a PEO partnership, the PEO collects and remits employment taxes for their clientele and worksite staff. The present tax law is somewhat vague relating to who is in the end accountable for the withholding and payment of those employment taxes in the PEO atmosphere - the client or the PEO. The SBEA eliminates any uncertainties by clarifying that it is the PEO which is accountable for remitting federal payroll taxes to the IRS. As such, employers that use certified PEOs to remit their payroll taxes are protected below the Act.

Additionally, the SBEA:

• Grants certified PEOs clear authority to collect and pay federal employment taxes on behalf of their consumers beneath the PEO's EIN (Employer Identification Quantity) for wages the PEO pays to worksite personnel;


• Gives protections for PEO clientele who pay their federal payroll tax obligations by means of a PEO and states PEO customers will in no way be held liable for these taxes;


• Considers the PEO a Successor Employer. This eliminates the double taxation of FICA and FUTA when a client joins or leaves a PEO mid-year. The law clarifies that employee wage bases will not restart when joining or leaving a PEO mid-year;


• Establishes that clientele, and not the PEO, can claim specific tax credits associated to employment taxes (the Work Chance Tax Credit, for instance). This removes any uncertainty and confirms PEO consumers may perhaps claim the identical tax credits that they would be entitled to claim if there had been no PEO connection.

The Certification Method

The SBEA tasks the IRS with generating a voluntary certification plan for PEOs preceding to the January 1, 2016 powerful date of the law. To qualify for IRS certification, PEOs need to meet a variety of stringent requirements, which includes:

• Particular bonding standards - PEO should really retain either a $50,000 bond or a bond equal to 5% of the PEO's federal employment tax liabilities for the preceding year (up to a maximum of $1 million);


• Getting and giving the IRS an independent economic critique from a certified accounting firm;


• Quarterly audits by an outdoors CPA firm with regards to payment of all employment taxes;


• Have no criminal record;


• Have a clean tax payment history;

CPEhr welcomes the passage of the SDEA and the IRS certification plan. CPEhr intends to voluntarily engage the certification Course of action to assure the highest requirements of accountability and reliability to its clientele.

Summary

With the increasing reputation of Experienced Employer Firms and the ongoing uncertainty of lots of laws pertaining to the PEO/client connection, CPEhr applauds the passage of the SBEA which resolves quite a few of those unsettled concerns. Additionally, numerous PEOs do not at present adhere to any market accreditation applications and the new law Delivers a sturdy message to organizations across the nation that using a certified PEO to handle their payroll and tax liabilities is a safe and accountable way to run their Small business.

For a lot more information and facts about CPEhr's Specialist Employer Organization solutions, please get in touch with us at info@cpehr.com