Attestation Requirements
Rev. Proc. 2016-33, section 2.06 (2)
(2) The examination level attestation from a CPA must state that the assertion described in section 2.06(1) is fairly stated in all material respects and comply with the requirements of the American Institute of Certified Public Accountants’ Statements of Standards for Attestation Engagements, including the specific requirements for Examination Reports. The attestation must be accompanied by a written declaration, signed by the CPA, that the CPA is currently qualified as a CPA and is authorized to represent the CPEO applicant before the IRS. A CPEO applicant will not fail to meet the requirements of this section 2.06(2) if the examination level attestation indicates that the CPEO applicant has failed to withhold or make deposits in certain immaterial respects, provided that–
(a) The attestation provides a summary of the immaterial failures that were found;
(b) The attestation states that, and explains why, the failures were immaterial and isolated and do not reflect a meaningful lapse in compliance with federal employment tax withholding and deposit requirements; and
(c) The IRS determines, in its sole discretion, that the isolated and immaterial failures identified by the CPA do not present a material risk to the IRS’s collection of federal employment taxes.
§301.7705-2T (f)
(f) Quarterly assertions and attestations—
(1) CPEOs. By the last day of the second month after the end of each calendar quarter, and beginning with the first calendar quarter, that ends after the CPEO’s effective date of certification, a CPEO must provide the following to the IRS:
(i) An assertion, signed by a responsible individual under penalties of perjury, stating that the CPEO has withheld and made deposits of all federal employment taxes (other than taxes imposed by chapter 23 of the Code) as required by subtitle C for such calendar quarter and an examination level attestation from a CPA stating that such assertion is fairly stated in all material respects.
(ii) A statement signed by a responsible individual under penalties of perjury verifying that the CPEO has positive working capital (as determined in accordance with GAAP) at the end of the most recently completed fiscal quarter, as well as such additional financial information that the Commissioner may specify in further guidance.
(2) Exceptions—
(i) Immaterial failures. A CPEO will not fail to meet the requirements of paragraph (f)(1)(i) of this section if the CPA examination level attestation indicates that the CPEO has failed to withhold or make deposits in certain immaterial respects, provided that—
(A) The attestation provides a summary of the immaterial failures that were found;
(B) The attestation states that the failures were immaterial and isolated and do not reflect a meaningful lapse in compliance with federal employment tax withholding and deposit requirements; and
(C) The IRS determines, in its sole discretion, that the isolated and immaterial failures identified by the CPA do not present a material risk to the IRS’s collection of federal employment taxes.
(ii) Negative working capital. A CPEO with negative working capital at the end of a fiscal quarter will not fail to meet the requirements of paragraph (f)(1)(ii) of this section if—
(A) The CPEO does not have negative working capital at the end of the two fiscal quarters immediately preceding such fiscal quarter, as demonstrated by the financial statements described in paragraph (e)(1) of this section, if available, or the statements described in paragraph (f)(1)(ii) of this section;
(B) The CPEO provides an explanation to the IRS describing the reason for such negative working capital in such time and manner as the Commissioner may prescribe in further guidance; and
(C) The IRS determines, in its sole discretion, that the negative working capital does not present a material risk to the IRS’s collection of federal employment taxes.
(3) CPEO applicants—
(i) In general. By the last day of the second month after the end of each calendar quarter, beginning with the most recently completed calendar quarter as of the date of a CPEO applicant’s application for certification and ending with the most recently completed calendar quarter as of the effective date of certification (if applicable), a CPEO applicant must provide to the IRS the assertion, examination level attestation, and working capital statement described in paragraph (f)(1) of this section, subject to the exceptions described in paragraph (f)(2) of this section (though substituting ‘‘CPEO applicant’’ for ‘‘CPEO’’).
(ii) Newly established CPEO applicants. A CPEO applicant that was not operating as a provider of employment-related services during the most recently completed calendar quarter as of the date of its application for certification or during any calendar quarter that ends while its application for certification is pending must provide to the IRS the assertion, examination level attestation, and working capital statement described in paragraph (f)(1) of this section with respect to any precursor entity, if applicable, in such time and manner as the Commissioner may prescribe in further guidance, as well as such additional information as the Commissioner may prescribe in further guidance.
Preamble to Final and Temporary Regulations, section 3(d)
d. Quarterly Assertion and Attestation
Section 7705(c)(3)(B) requires a CPEO to provide to the Secretary an assertion and examination level attestation regarding its compliance with federal employment tax withholding and depositing requirements. In accordance with this provision, the temporary regulations state that a CPEO must provide, on a quarterly basis and beginning with the first calendar quarter that ends after the CPEO’s effective date of certification, an assertion signed by a responsible individual under penalties of perjury stating that the CPEO has withheld and made deposits of all federal employment taxes (other than taxes imposed by chapter 23 of the Code) as required for the quarter.5 In addition, the CPEO must provide an examination level attestation from a CPA stating that this assertion is fairly stated. The assertion and attestation must be provided by the last day of the second month after the end of each calendar quarter. These quarterly assertion and attestation requirements also apply to a CPEO applicant, who must provide the required assertion and attestation for the most recently completed calendar quarter as of the date of its application for certification and each subsequent calendar quarter while its application is pending. A CPEO applicant that was not operating as a provider of employment-related services during the most recently completed calendar quarter as of the date of its application for certification or during any quarter that ends while its application for certification is pending must provide an assertion and attestation for any precursor entity in such time and manner as the Commissioner may prescribe in further guidance.
The temporary regulations provide that a CPEO applicant or CPEO will not fail to meet the quarterly assertion and attestation requirements if the CPA examination level attestation indicates that the CPEO applicant or CPEO has failed to withhold or make deposits in certain immaterial respects, provided that the attestation includes a summary of the immaterial failures that were found and states that the failures were immaterial and isolated and do not reflect a meaningful lapse in compliance with federal employment tax withholding and deposit requirements. Furthermore, in order for this exception for immaterial failures to apply, the IRS must determine, in its sole discretion, that the isolated and immaterial failures identified by the CPA do not present a material risk to the IRS’s collection of federal employment taxes.