PEOs and the CARES Act

[Eric Green]

Many members have been asking Jeff Sklarz about PEOs and CARES Act. The SBA just updated its website with the following:

10. Question: What if an eligible borrower contracts with a third-party payer such as a
payroll provider or a Professional Employer Organization (PEO) to process payroll and
report payroll taxes?

Answer: SBA recognizes that eligible borrowers that use PEOs or similar payroll
providers are required under some state registration laws to report wage and other data on
the Employer Identification Number (EIN) of the PEO or other payroll provider. In these
cases, payroll documentation provided by the payroll provider that indicates the amount
of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s
employees will be considered acceptable PPP loan payroll documentation. Relevant
information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941
Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly
Federal Tax Return, should be used if it is available; otherwise, the eligible borrower
should obtain a statement from the payroll provider documenting the amount of wages
and payroll taxes. In addition, employees of the eligible borrower will not be considered
employees of the eligible borrower’s payroll provider or PEO.

[Author]

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