One Large Step for PEO Industry = IRS Certification

PEO Industry and the newly Certified PEO status.

Tandem HR’s Senior Director of Operations, Greg Foss, discussed the new Certified Professional Employer Organization (CPEO) status with the IRS on Get Down to Business, a radio show for entrepreneurs and business executives that airs on 560 AM The Answer on Sunday evenings from 6 – 7 pm CT. Greg and host, Shalom Klein, discussed the benefits the new designation has for the PEO industry and PEO clients.

Certified PEO: Read the transcribed radio segment or click below to listen.

Interviewer: We are here in the studio with Senior Director of Operations at Tandem HR, Greg Foss. Greg, you are the most knowledgeable person, or at least here in the studio the most knowledgeable person, about the world of HR. All kidding aside, Tandem HR has been quite involved in educating the business community (both clients and non-clients) with that beautiful new website of yours and its great blog with great information. I know here, on the air, we benefit and appreciate all of the information Tandem HR has been providing. So thank you for that! There’s always something interesting going on in HR. We’ve talked about some of the issues that Cook County is experiencing, we’ve discussed the Affordable Care Act, and now there’s something called the Small Business Efficiency Act (SBEA). What is that all about?

Greg: The SBEA was originally signed back in late 2014. It was supposed to take effect in 2016, but after some delays, it’s finally taking effect. The SBEA sets up a certification program through the IRS for Professional Employer Organizations (or PEOs). To become an IRS certified PEO, the PEO needs to share a lot of financial and operational information with the IRS. Once the IRS approves the PEO, it is essentially saying – we have inspected the certified PEO and acknowledge it is legitimate and financially sound. Ultimately, it comes down to federal tax payments.

When a small business signs up with an IRS certified PEO, the IRS is saying – as long as you pay the CPEO your federal tax payments than all of the liability to submit those federal tax payments to the IRS is now the responsibility of that CPEO. This allows business owners to go home and rest at night knowing they are paid up from a federal tax perspective.

Interviewer: Is this something that Tandem HR supports?

Greg: Absolutely! We received letters on June 1 of this year, letting us know we are officially a certified PEO. That’s very exciting news for us and our clients.

Interviewer: That is very exciting! So we’ve spent a lot of time on this program discussing the benefits of PEOs to small businesses, but specifically what does the CPEO status mean for the PEO industry and for your clients? Ultimately, what everybody cares about is – ‘how does this help me’?

Greg: Yes, so essentially it means that PEOs are now recognized in the IRS tax code. When new rules and laws are developed, especially related to federal employment taxes, CPEOs will specifically be addressed. PEOs are going to get a lot more exposure and more small businesses will begin to understand what a PEO is and how a PEO can help them grow their business. We want business owners to focus on what they do best (grow their business) and leave HR related tasks like payroll and compliance to us, the PEO.

Interviewer: The act is called the Small Business Efficiency Act, so I’m presuming that small businesses will benefit from it. Are you seeing a trend with small businesses starting to embrace the idea of partnering with a PEO, like Tandem HR, as opposed to trying to do things on their own? I’ve always had an issue with how the federal government defines small business, which is a whole topic for itself, but generally small businesses often don’t have the resources to handle their administrative HR functions in-house. Just following regulatory compliance is more than a full- time job, so is this something that you’re starting to see small businesses embrace?

Greg: Absolutely! If you look at other markets out there, like Florida, Texas, and California, the PEO industry penetration is higher than here in Illinois. It is absolutely a growing trend. What the SBEA does to assist with this is show the IRS embraces the concept. The IRS really doesn’t want to have to go to each small business and ask about reconciling employment taxes. They want to talk to the experts; it’s easier from an audit standpoint. They don’t want to go into mom and pop shops and be perceived as the ‘bad guys’ asking tough questions when they could spend less time talking to those of us that do this for a living. The PEO relationship is certainly a growing trend in Illinois and the SBEA and IRS will assist with additional familiarity.

Interviewer: That’s interesting. The IRS is so understaffed and under-resourced, so it makes a lot of sense to consolidate that and embrace the idea that PEOs will make their job easier. A good friend of this show, a CPA, has discussed on air how the IRS is one of those agencies that for every dollar it earns, it produces more revenue for the government. She’s been advocating for more resources for the IRS and this is a great idea to enhance efficiencies. You mentioned a moment ago a few states that have a higher PEO market penetration. Do you think the SBEA will prompt a similar bill or act at the state level, modeling itself after this federal act?

Greg: That’s the goal. We want to take this one step further and apply to state/local rules as well. The federal government is always a great place to start. We’d love to go to each state and say – the federal government embraced this, here are the benefits for embracing this at the state level and if you embrace the same concept it will help bring uniformity to the entire process

Interviewer: Well, Greg, we’ve got to work slowly here in Illinois. I mean we just passed the budget after three years so I assume we could have this conversation in a few years. All kidding aside though, it’s certainly something that will make life easier on small business and that is what this show is all about. We are just about out of time and I want to make sure our listeners can find Tandem HR, so they can have all of their questions answered. Greg – how can people reach you?

Greg: Visit our website at or call us anytime at 630.928.0510.

Interviewer: Great! That’s 630.928.0510. Check out the website that Greg just mentioned – A wealth of knowledge and wealth of information. Certainly, as the SBEA, the Small Business Efficiency Act, is hopefully replicated here in Illinois I know our listeners will be looking to Tandem HR for more information. We will be right back with more tips, advice, and information for small businesses and entrepreneurs.