IRS Releases Second Revenue Procedure on PEO Certification
On December 29, 2016, the Internal Revenue Service (IRS) released Revenue Procedure 2017-14
which provides detailed procedures for certified PEOs (CPEOs) to maintain their certification. In addition, the revenue procedure describes procedures relating to the suspension and revocation of certification, and it provides certain limited transition relief for CPEOs with a January 1, 2017, effective date of certification that do not receive notice of such effective date from the IRS until after January 1st.
The significant provisions of the Revenue Procedure include:
• Annual Recertification: A CPEO must submit a properly completed and executed online annual verification to maintain certification. CPEOs that are members of a controlled group must each submit a separate annual verification.
• Financial Reporting and Surety Bond: The Revenue Procedure generally restates previously published guidance on the annual and quarterly financial reporting requirements, and the surety bond requirements.
• Reporting of Commencement or Termination of Contracts: A CPEO must report to the IRS the commencement or termination of any CPEO contract between the CPEO and a customer, or any service agreement described in §31.3504-2(b)(2) between the CPEO and a client, and the name and EIN of such customer or client, using Form 8973, Certified Professional Employer Organization/Customer Reporting Agreement.
• Reporting of Material Changes: A CPEO must notify the IRS of any change that materially affects the continuing accuracy of any agreement or information that was previously made or provided to the IRS (a “material change”), including a modification or update to previously provided information, as well as new information (e.g., a new responsible individual). A CPEO must notify the IRS of a material change no later than 30 days (45 days in the case of a new responsible individual) after the date of the material change.
• Reporting of Material Changes by Responsible Individuals: Responsible individuals of a CPEO must notify the IRS of any material changes to the information they submitted on the Responsible Individual Personal Attestation (RIPA) within 30 days of the change.
• Client Reporting: The Revenue Procedure generally restates previously published guidance on the CPEO's reporting obligations with respect to its clients.
• Limitations on CPEO Sole Liability: The Revenue Procedure states that the CPEO sole liability provisions will not apply in certain circumstances, including when the customer has commenced a CPEO contract with the CPEO but such commencement has not been reported to the IRS within the required timeframe.
• Customer Service Agreement Requirements: The Revenue Procedure provides that in situations in which a CPEO contract with a customer covers remuneration paid by a CPEO to self-employed individuals, the CPEO contract must notify, or be accompanied by notification to, the customer that the remuneration paid by the CPEO to any self-employed individuals is not covered by Code section 3511.
• Suspension and/or Revocation of Certification: The Revenue Procedure generally restates previously published guidance on suspension and/or revocation of certification.
• Notice of Voluntary Termination: A CPEO may voluntarily terminate its certification at any time other than while its certification is suspended.
Randy Hardock and Courtney Zinter of Davis & Harman have prepared a detailed summary
of the Revenue Procedure, which was effective as of December 29, 2016.
NAPEO Files Comments on CPEO Application Form
On December 22, 2016, Randy Hardock filed comments
with the IRS on behalf of NAPEO on the CPEO Application (Form 14737) and the Responsible Individual Personal Attestation (RIPA) (Form 14737-A). NAPEO filed these comments in response to a request
from the Department of Treasury and the IRS under the Paperwork Reduction Act on the necessity and burden of the IRS PEO certification forms as well as how the forms may be improved. In addition to commenting on the CPEO Application, the RIPA, and the submission process for these forms, the comments also addressed concerns regarding the overall CPEO application and approval process.