We all know the traditional definition of a professional employer organization, or PEO. PEOs provide small and medium-sized businesses with numerous benefits — from comprehensive human resources management and employee benefits administration to reducing the number of administrative tasks, the list goes on. However, there is another type of PEO that can provide clients with even more benefits, a CPEO. At WorkSmart, we’re proud to have just received the CPEO as of January 1. Let’s take a look at what a CPEO is, and how we can further benefit our clients.

What is a CPEO?

A certified professional employer organization, or CPEO, is defined as a PEO who has undergone all necessary steps to attain IRS certification. Reaching certification status from the IRS is no easy task. In order to meet the standards, PEOs must:

● Perform an audit of all financial statements using a third-party CPA
● Maintain positive working capital requirements
● Provide all documentation that employment taxes are being paid in a timely manner
● Provide background reports and extensive information about the individuals responsible for paying employment taxes and managing crucial corporate functions

While this process seems extensive the IRS has good reasons for placing such rigorous requirements. Since a CPEO is completely responsible and liable for paying employment taxes on wages they pay to worksite employees, the IRS wants to make sure that the organization is reputable and will actually make the payments and remain compliant with processes. Despite the daunting regulations in place, CPEOs can offer their clients numerous benefits that traditional PEOs cannot.

What sets them apart

CPEOs offer their clients three key benefits. First, they are fully vetted by the IRS. So, what does this mean? Since there is such an extensive process to follow to attain certification, CPEOs can, in turn, offer employers greater financial protection. Second, there is no restarting of wage-based payroll tax, meaning companies can now switch mid-year to work with a CPEO and taxes paid on the previous federal identification number will carry over. This is all possible because CPEOs are considered successor employers which no longer requires double tax payments. Finally, CPEOs can offer its clients zero liability for federal employment taxes. This is a significant advantage since clients of a CPEO can no longer be held liable for unpaid federal employment taxes when previously they were liable even if the failure to pay was the fault of their PEO.

As a CPEO, we look forward to offering our clients a more streamlined process for everyone involved, as well as peace of mind in the new year.

To learn more about how a CPEO can benefit your business check out this announcement about WorkSmart’s recent certification!