Liability for Payroll Taxes

Clarifying PEO and Client Liability

The IRS believes certified PEOs (CPEOs) are solely liable and PEOs are jointly liable for ERTC credits taken on their amended tax returns. NAPEO’s position is that this interpretation is inconsistent with the statute and congressional intent in creating such tax credits. In addition, PEOs do not have access to the information needed to verify the eligibility of their clients for payroll tax credits. 

From a fairness and tax administration standpoint, the liability for such claims should belong to the entity that initiates and benefits from the claim and should only be expanded to the PEO in cases of fraud or knowledge of an improper claim.

Legislation updates

Reps. Beth Van Duyne (R-TX) and Mike Thompson (D-CA) will soon introduce legislation that makes clear the liability for payroll tax credit claims made by PEO clients belongs to the entity that initiates and benefits from the claim, and is only expanded to a PEO in cases of fraud or knowledge of an improper claim.  The bill lays out a clear, fair liability determination process by establishing that PEOs and clients are each solely responsible for the respective information they own. 

NAPEO is advocating that the bill be included in the comprehensive tax reform effort in Congress. In addition, we are working to have a companion bill introduced in the Senate.