This section will outline what you need to know now that you are a Certified Professional Employer Organization (CPEO).
- Bonding requirements
- CPEO Account Updates
- Public listing of certified professional employer organizations
- Electronic filing waiver request procedures for CPEOs
- Elements of a waiver request claiming undue hardship
- Time for Filing a Waiver Request
- How to voluntarily terminate your certification
CPEO applicant has 30 days from the date of the notice of certification to submit to the IRS proof of a bond in the form of a properly completed and executed Form 14751, Certified Professional Employer Organization Surety Bond (PDF), signed by both a qualified surety and the CPEO (or CPEOs in the case of a controlled group), and in an amount that is at least equal to the greater of 5% of the CPEO’s liability under section 3511 during the preceding calendar year (up to $1,000,000) or $50,000. All CPEO members of a controlled group are required to be covered by the same bond in the amount set forth in the previous sentence, as if all such members were one organization. For a CPEO that does not have section 3511 liability for the preceding year (or has section 3511 liability for only part of the year) because the CPEO is new and wasn’t certified for all or a portion of the preceding year, there are special rules that apply to a CPEO in its first or second year of certification. See section 301.7705-2T(g)(2) of the Temporary Regulations for more information. To submit a properly completed and executed Form 14751, a CPEO applicant must log in to its Online Registration System account. In the section titled 'Manage your License Information', there is a row with the CPEO-#. In that row is a dropdown. Select ‘Form 14751, CPEO Surety Bond’ and click 'Select' to begin the transaction. Follow the instructions on-screen to complete the transaction and upload the form.
A CPEO applicant's certification will not become effective if the CPEO applicant fails to provide the proof of a bond in the form of a properly completed and executed Form 14751 within 30 days after the date of the notice of certification. The CPEO applicant will subsequently be sent a final notice of denial (with no opportunity to request review of the denial).
Controlled Group members must have their Controlled Group representative submit their Form 14751 with all Controlled Group members listed on the same bond. CPEOs who are part of Controlled Group will be unable to individually submit a Form 14571 as it must be submitted through their Controlled Group by the Controlled Group representative. This is done through the IRS Online Registration System for Professional Employer Organizations. On the Main Menu, go to the "Manage your license information" drop down menu and select "Form 14751, CPEO Surety Bond" under the Controlled Group drop down to upload these documents.
If you are part of a Controlled Group but have not yet registered as a Controlled Group in the IRS Online Registration System (new functionality as of April 2018), visit Create a Controlled Group License to learn how to register as a Controlled Group. If you have not yet registered as a Controlled Group and need to submit a new Form 14751, CPEO Surety Bond, you may continue to submit under each CPEO covered by the bond, but must submit under each CPEO account. On the Main Menu, go to the "Manage your license information" dropdown menu and select "Form 14751, CPEO Surety Bond" under the Controlled Group drop down to upload these documents. In addition, under the "Manage your license information" dropdown menu, there is an option to "View/Update Controlled Group", which allows the Controlled Group representative the option to change information such as a phone number and mailing address.
The Controlled Group license that links CPEOs and Responsible individuals can be withdrawn at any time. Please note: withdrawing your CPEO certification is a separate process. It is possible to withdraw the Controlled Group license and maintain the CPEO license. To withdraw the Controlled Group license, the Controlled Group representative is to submit a written request to the program. Once the withdrawal is approved, CPEOs and Responsible Individuals will no longer be associated with the Control Group.
CPEO Account Updates
After logging into your account on the IRS Online Registration System, if your License Rank shows Active, Pending, or Suspended, select “Update CPEO Account Information” from the dropdown options under “Manage Your License Information” to make changes to your account and/or to upload the required annual audited financial statement for the CPEO.
Types of changes you can report through this account update include, but are not limited to, changes in
- tax compliance,
- criminal background,
- professional license or registration status of the CPEO or any of its precursor entities, related entities or responsible individuals,
- the CPEO applicant’s fiscal year,
- responsible individuals, or
- another entity being considered a precursor or related entity of the CPEO.
Once you begin the “Update CPEO Account Information” process, follow the instructions on each screen to identify and make changes as needed. You will also need to include the date that each change occurred. You can also upload documents. All changes and uploads are submitted under penalty of perjury. Once submitted, you can download and print a summary report of your changes for your records.
If you only need to upload documents, after beginning the update process, select the bottom option on the “Update CPEO Account Information” – “Identify Changes” page. Be sure the name of the file you are uploading accurately identifies what you are uploading. In the “Notes” section, add the description of the file you are uploading.
Public Listing of Certified Professional Employer Organizations
The IRS will publish a list of all organizations that are certified as CPEOs, and the effective date of their certification on the Voluntary Certification Program for Professional Employer Organizations (CPEOs) page on a quarterly basis, by the 15th day of the first month of every calendar quarter. We expect the initial list to be available in mid-July 2017.
An organization will not appear on this list until the IRS has received from it the proof of bond on Form 14751.
The names of many CPEOs are similar. A single brand name can represent more than one business entity in a group. Please note: a CPEO contract must contain the exact name and Employer Identification Number (EIN) of the CPEO fulfilling the federal employment tax obligations covered by the contract. Once published, please check the list of CPEOs carefully.
Electronic Filing Waiver Request Procedures For CPEOs
COVID-19 Relief: Temporary waiver for CPEOs required to e-file Forms 941 and 943
The temporary waiver of the requirement that CPEOs electronically file certain employment tax returns and their accompanying schedules applies only to the following employment tax returns:
- Forms 941, and their accompanying schedules, filed for the second, third, and fourth quarters of 2020
- Forms 943, and their accompanying schedules, for the calendar year 2020
Because this temporary waiver is provided to all CPEOs, individual requests for waivers are not required. The IRS will not respond to individual electronic filing waiver requests submitted for the second, third, and fourth quarters of 2020. Refer to Notice 2020-35 (PDF) for additional details.
When the temporary waiver period expires, CPEOs are required to electronically file Form 941, Employer’s QUARTERLY Federal Tax Return, and Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Under certain circumstances, the Service may waive the electronic filing requirement.
The Service will approve or deny requests for a waiver of the electronic filing requirement based on each CPEO’s particular facts and circumstances. In determining whether to approve or deny a waiver request, the Service will consider the CPEO’s ability to timely file its return electronically without incurring an undue economic hardship. The principal factor in determining undue economic hardship will be the amount, if any, by which the cost of electronically filing Form 940 and 941 (and all applicable schedules) exceeds the cost of paper filing. The Service will also consider temporary software and technological issues that prevent the CPEO from electronically filing. Temporary generally means the problem is expected to only affect the filing of one return. Waivers claiming technological issues as the explanation for continual paper filing will be denied.
Elements of a Waiver Request Claiming Undue Hardship
To request a waiver, the CPEO must file a written request containing the following information:
- A notation at the top of the request stating, in large letters, the type of form followed by the words “e-file Waiver Request” (e.g., "Form 941 e-file Waiver Request” or “Form 940 e-file Waiver Request”).
- The CPEO’s name, federal tax identification number, mailing address, contact name, phone number and e-mail address.
- The type of form for which the waiver is requested (only one form type per request).
- The taxable period for which the waiver is requested (only one taxable period per request). (Please note: The IRS only accepts single-period waiver requests for the current taxable period. For example, during the first quarter, the IRS will only consider waiver requests pertaining to forms required to be filed with respect to the first quarter. Waiver requests pertaining to tax periods other than the current tax period will not be accepted or considered.)
- A detailed statement which lists:
- The steps the CPEO has taken in an attempt to meet its requirement to timely file its return electronically,
- Why the steps were unsuccessful, and
- A description of the undue hardship – economic, technological, or otherwise – that would result from complying with the electronic filing requirement. If the hardship is economic, the CPEO must include the amount by which the cost of electronically filing Form 940 and Form 941 (and all applicable schedules) exceeds the cost of paper filing. These incremental costs must be supported by a detailed computation. The detailed computation must include a schedule detailing the costs to file on paper and the costs to file electronically.
- A statement as to what steps the CPEO will take to assure its ability to file future returns electronically and the date this is expected to be achieved.
- A statement (signed by an individual authorized to sign the CPEO’s return), with the following language:
Under penalties of perjury, I declare that the information contained in this waiver request is true, correct and complete to the best of my knowledge and belief.
Requests made by an authorized representative of the CPEO must include a valid power of attorney.
The waiver request should not be attached to the CPEO’s paper tax return.
Time for Filing a Waiver Request
CPEOs should file waiver requests at least 45 days before the due date of the return for which the CPEO is unable to electronically file. This will give the Service time to process the waiver request.
Place for Filing a Waiver Request
CPEOs should file a waiver request using the IRS Online Registration System for Professional Employer Organizations.
From the Main Menu, select “e-File Waiver Request” from the dropdown in the CPEO row matching the organization for which the waiver request is being submitted.
Approval of the Waiver Request
The Service will review and process waiver requests in a timely manner and will send the CPEO written notice of any approval or rejection of the CPEO’s waiver request. The Service will not be considered to have waived the e-filing requirement unless the CPEO receives written approval from the Service that the waiver request has been approved. In the absence of written approval, a failure to e-file may subject a CPEO to suspension or revocation.
How to Voluntarily Terminate your Certification
A CPEO may voluntarily terminate its certification at any time other than while its certification is suspended. To voluntarily terminate its certification, the CPEO must submit to the IRS, via the CPEO’s online account, a written notice of voluntary termination at least 30 days prior to the date on which the CPEO intends for the termination to take effect. The effective date chosen by the CPEO must coincide with the first day of a calendar quarter.
Prior to sending the IRS the notice of voluntary termination, the CPEO must notify each of its customers in writing of the CPEO’s intention to terminate its certification and of the proposed effective date of termination, and provide an explanation of the employment tax consequences of termination, including a statement that the customer may also be liable (as of the effective date of termination) for federal employment taxes imposed on remuneration remitted by the CPEO to all employees covered by the customer’s contract with the CPEO. A sample of the notification to customers referred to in the preceding sentence must be attached to the notice of voluntary termination submitted by the CPEO to the IRS.
To submit a notice of voluntary termination and a sample of the notification to customers, a CPEO must:
Log in to its Online Registration System account. In the section titled 'Manage your License Information', there is a row with the CPEO-#. In that row is a dropdown. Select ‘Update CPEO Account Information’ and click 'Select' to begin the transaction. Mark the 'Update' button for 'Upload Attachments (Including Waiver)' and select 'Next.' Follow the steps on the 'Document Upload' screen to separately submit the 'Notice of Voluntary Termination' and 'Termination Letter Sent to Customers.' The following document extensions are acceptable: .pdf, .doc, .docx, .rtf, .txt, .gif, .jpeg, .jpg, and .png. To complete the transaction, review the information and sign the submission.
A CPEO that voluntarily terminates its certification is, as of the effective date stated in the notice of voluntary termination, no longer a CPEO and the provisions of section 3511 of the Code will no longer apply to the organization. The CPEO will also be removed from the list of CPEOs that the IRS publishes on www.irs.gov, which is updated by the 15th day of the first month of every calendar quarter.