Many businesses use professional employer organizations, also known as PEOs, to outsource many tasks to handle their employees. For example, it is common for companies to hire a PEO to outsource their payroll, training, or employee benefits, to name a few.

Unfortunately, tax fraud has been on the rise with many PEOs, so the IRS is revamping how it handles their rules. Here are things you need to know to make sure you are dealing with a reputable PEO.


Make Sure Your PEO is Certified

Though there is a certification process for PEOs through the IRS, that certification is wholly voluntary. It is not against the law to use a PEO that has not been certified.

This means that if you are using a PEO that has not been certified, there are less protections for potential fraud. Using a certified PEO grants both your organization and the PEO greater federal employment tax protection. 


New Guidelines Proposed

The Treasury inspector General has outlined a set of six proposals to encourage compliance and certification from remaining PEOs that are uncertified. The IRS has accepted, and is now taking corrective steps. Forthcoming will be an additional program where PEOs will be required to register with the IRS through an application that will require several new forms. In addition, the IRS will standardize the application procedure in order to streamline the process.


Processes are Improved, But Certification is Still Voluntary

The new guidelines will improve tracking of PEOs and help diminish some forms of fraud. The IRS has indicated it has become better at reviewing processing applications from PEOs, so the overall process will become faster.

However, full-out certification is still voluntary, so it is important as an employer to confirm your PEO has its certification. Though new safeguards are always being developed, it’s important as an employer to have total accountability with the PEOS that they work with.

Currently, roughly between 12-15% of PEOs are certified, or are in the process of being certified.


Want to Know More PEO Certification and Verification?

It is important to protect yourself fully when dealing with a PEO. Transparency and total accountability are important. PDM’s tax experts can help advise you on the best course of action. Contact us; with our years of technical experience, advanced training, and cutting edge technology, we are your financial partner.