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US CPAs Comment On Professional Employer Organization Regs

by Mike Godfrey, Tax-News.com, Washington

19 August 2016


The American Institute of Certified Public Accountants (AICPA) has provided recommendations regarding the proposed regulations to establish the certification of Professional Employer Organizations (PEOs), in a letter to the US Internal Revenue Service (IRS) dated August 16.

PEOs provide human resource services under which employers can outsource various payroll administration and tax reporting responsibilities, such as the administration of employee benefits; payroll and workers' compensation; pension accounting arrangements; recruiting; and training and development. Up to three million taxpayers are covered by a PEO arrangement.

Under a legislative requirement enacted in December 2014, the IRS is required to establish a voluntary certification program for PEOs. As part of the program, among other requirements, a certified PEO (CPEO) applicant must pass background and tax compliance checks; secure an approved surety bond; satisfy financial review requirements; provide quarterly assertions and attestations regarding federal employment tax compliance; and comply with the terms of any service agreements with customers.

In its letter, the AICPA focused on the areas of the proposed regulations concerning CPAs. The letter makes recommendations and requests clarifications concerning the definition of a CPA, representation of the CPEO before the IRS by the CPA, working capital financial statement opinions, and the responsibilities with respect to the quarterly assertions and attestations.

For example, the AICPA recommended a change in the language related to the definition of a CPA from "Is duly qualified to practice in any state" to "Is duly authorized to practice by a state board of accountancy," to reflect CPA state licensure regulations under the National Association of State Boards of Accountancy (NASBA).

In addition, the proposed regulations require that the opinion regarding a CPEO's financial statements should be provided by a CPA who is independent of the CPEO. The IRS questioned whether "requirements of other governmental agencies or departments or industry self-regulatory bodies would better ensure the impartiality of CPAs providing opinions on CPEO's financial statements."

The AICPA, on the other hand, insisted that "the AICPA's Code of Professional Conduct is appropriate to provide for an independent audit and examination with regard to the CPEO process. Our Code of Professional Conduct is familiar to all 412,000 AICPA members."

"Currently," it added, "35 of the 55 jurisdictions in the United States have adopted the AICPA's independence rules, and the AICPA and NASBA are working with state boards of accountancy to encourage nationwide adoption of the AICPA Code of Professional Conduct over the next few years."

TAGS: compliance | tax | business | tax compliance | law | accounting | audit | payroll | United States | financial reporting | standards | regulation | services

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