Find out what this legislation means for small businesses and PEOs.
On Tuesday, December 16, the U.S. Senate passed the Small Business Efficiency Act (SBEA); eight days later the President signed the bill. The legislation creates a voluntary program for professional employer organizations (PEOs) to be certified by the IRS and also establishes a set of definitions and rules for PEOs under the federal tax code.
The act will have positive ramifications for small businesses and the PEO industry alike. Here’s why:
A rigorous certification process: In order to become IRS certified under the SBEA, a PEO would have to meet strict financial standards, including bonding and independent financial audit requirements, and meet reporting obligations and other mandates set forth by the IRS.
Small businesses will get added peace of mind when it comes to payroll taxes: Today, employers working with PEOs share the responsibility of paying federal taxes for worksite employees, and they share the risks of not paying them as well. If a PEO fails to pay taxes, both the PEO and the company would be exposed to audits and fines. However, under the SBEA, an IRS-certified PEO would be able to assume sole liability for the collection and remission of federal taxes for worksite employees, removing all burden and liability for the company.
The government is recognizing the important role that PEOs play in small business success: Nearly 250,000 businesses rely on PEOs, and the SBEA is affirmation of the positive impact PEOs have made.
What’s next for the SBEA and Alcott HR?
The SBEA is awaiting President Obama’s signature. When he does sign it, we look forward to attaining IRS certification.
In the meantime, we at Alcott HR are already committed to meeting the most strict and stringent standards in the PEO industry. For example, we are certified by The Employer Services Assurance Corporation (E.S.A.C.), which ensures our financial reliability and compliance with ethical, financial and operational best practices. We are also in full compliance with the Certification Institute’s workers’ compensation risk management best practices.
To learn more about the SBEA, our quality programs, and how we can help small businesses like yours, contact us today.