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Tackling Tax Laws: How It Works with a PEO in 2021

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Tax season is fast approaching. More than ever, CPAs are advising small businesses, nonprofits and large corporations in 2021 to consider the services of a professional employer organization (PEO). That’s because PEOs like Integrity Employee Leasing (IEL) not only specialize in human resources management, but also excel in payroll tax filing, administration and compliance.

It all started in the 1970s, when a safe-harbor provision in federal tax legislation allowed companies to distribute pension plans to management personnel that differed from those offered to “regular” employees, on the condition that the “regular” staff was leased. While the legal safe harbor later disappeared, the trend of leasing employees became mainstream after the creation of the first PEO.

Today, there are over 1,000 PEO organizations nationwide, supporting more than 3 million leased employees. The collective payroll of these PEOs is estimated at more than $18 billion. And, according to Forbes, the average annual cost of regulation, paperwork and tax compliance for companies with fewer than 500 employees is about $5,000 per individual. For those with more than 500 employees, this figure jumps to roughly $3,400 per employee. It’s one reason why many companies choose to deploy a knowledgeable, experienced PEO partner to handle complex tax administration.

Traditionally, the PEO will assume primary responsibility for paying employee wages and withholding taxes. In addition, the PEO can administer benefits programs such as retirement plans, disability, accidental death and life insurance, as well as plan compliance with applicable federal and state laws. In this context, the Internal Revenue Service (IRS) considers the PEO to be liable for paying trust fund, income and unemployment taxes. The PEO also has the burden of proof – recordkeeping, documentation and explanation.

What does this mean for business owners?

When a client chooses to outsource these complex employee, tax, benefit and regulatory compliance areas, their PEO assumes all the obligations and administrative burdens, a strong incentive for small and mid-size companies. PEOs are structured and experienced at handling these requirements efficiently and accurately.

This frees a business owner’s time to focus on critical business operations, innovation, profitability and online expansion, rather than keeping up with ever-changing workplace regulations. It also reduces the risk of penalty and interest charges, as well as sanctions for technical, administrative or regulatory mistakes.

It also saves resources and money for small and medium-sized businesses. According to the Department of Labor, a PEO can handle its administrative responsibilities at one-third to two-thirds of the cost that an average business would incur to provide similar services. To cover the cost of partnering with a PEO, some clients find they can compensate by reducing their internal administrative staff requirements.

Relief is just a phone call away. “I have never been so happy with a payroll company,” said Melissa V., in an online recommendation for Integrity Employee Leasing. “As a small but growing business, the Integrity team really helped give me peace of mind and took a lot off my plate! They are all so friendly, helpful and efficient. Love them!”

Could a proactive partnership with Integrity Employee Leasing streamline your payroll taxes, administration and compliance and save you time, money and stress? Learn more about how Integrity at https://integrityel.com/why-peo, or call us at (941) 625-0623 to schedule a consultation. 

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