ERC Tax Credits for Clients Who Work with PEOs
Many of our clients work with PEOs (Professional Employer Organizations), which are companies that handle payroll. When we work with PEOs, we do everything but the actual filing since the Form 941 is that of your PEO.
Each business under the PEO will have a ”schedule,” and their 941 filing schedule determines when we are able to file or amend returns of companies with a PEO.
In fact, the IRS is aware of this and has specifically given direction on the PEO’s obligation to file this form on their client’s behalf.
We have found that typically PEOs don’t want to do the work to substantiate, qualify and calculate the ERC tax credit. That’s where we come in. We do exactly that and provide the information your PEO needs to amend your tax returns.
What You Need to File ERC When Working with a PEO
The good news is your business is eligible to claim the ERC through your third-party payer if you leverage a PEO, CPEO or other third-party service provider. This was made possible by the IRS Notice 2021-20, which provides critical guidance on the process of claiming the ERC tax credit.
This guidance tells us that a PEO needs to collect all information from the client that is necessary to appropriately claim the ERC on their behalf. This includes information related to other tax credits you may have claimed. For example, things like emergency paid sick leave, family leave or paid family medical leave need to be documented. You will also need to report where you received a PPP loan, although the receipt of PPP funds is not a game ender as we’ve discussed previously.
Initially, small businesses can begin by creating a detailed payroll report that contains a list of all paychecks for every employee between March 13, 2020 and September 30, 2021. Once the documentation is ready, you’ll work with ERC Specialists to send it to your PEO point of contact with a request to amend the previous quarters specifically for the ERC tax credit.
Your PEO must file an amended IRS Form 941 and Schedule R for the applicable quarters in which you seek an ERC credit. Unfortunately, filing Form 7200 or reducing current payroll tax obligations for 2020 reporting quarters isn’t accepted by the IRS in order to claim ERC.
Failure to Abide by IRS Information Requests Have Serious Consequences
The IRS Notice somewhat clearly indicates that a PEO can rely on information provided by its client regarding eligibility to claim ERC tax credits. Confused? This simply means the PEO and/or the client must maintain any and all records that prove its eligibility for the ERC tax credits. While that’s really nothing new in principle, it is worth calling out that the documentation needs for the ERC process are necessary, crucial and expected by the IRS.
In addition, any failure to provide the IRS with information it requests in order to verify your ERC claims can result in each party being held liable for employment taxes due as a result of an erroneous ERC claim. You don’t want this to happen to you. And that’s why you need us.
At ERC Specialists, our sole focus and commitment is obtaining the ERC funds available to you without all the stress and worry of a potential fine or trouble with the IRS. No business owner can afford that.
Yes, you can get ERC funding if you work with a PEO, but certain qualifications are required of employers. However, when you trust the payroll experts at
ERC Specialists, you can relax and know we’ve crossed every T and dotted every I to ensure your business receives the maximum ERC benefits for which you are eligible. Don’t delay, contact us today to get started.
