Outsourcing payroll functions can save business owners and operators time and money. Using vendor expertise lets employers focus on marketing their core strengths and customer fulfillment. For some companies, it is a good deal—and sometimes it isn’t.
A professional employer organization (PEO) is a company that handles personnel services for small- to mid-size companies. These businesses are called employee-leasing firms. With pricing based on the number of employees served, PEOs often provide services that include:
- Benefit sourcing and service: With multiple clients, PEOs can source and provide benefits that might otherwise be out of reach to a small business. Health, vision, dental, and workers’ compensation programs can become affordable to employers using a PEO. Coordination of 401(k) and other pension benefits are also sometimes available through PEOs, saving entrepreneurs and owners the hassle of shopping and qualifying for affordable benefits for their workers.
- Payroll and compliance services: Employee payroll, collection and pay over of employment taxes, coordination of vendor payments, and filing of regulatory records are an important service offered by PEOs.
- Human resources: PEOs may offer recruiting and employee screening services as well as workplace safety and risk management consulting.
Due diligence is critical when considering a PEO, but there is more.
Employee-leasing companies often come under extra scrutiny in any business community because the business model is often associated with tax fraud. Operating individually or as a network of affiliated companies, PEOs may operate respectably for a period of time—or the long term—before it is discovered that employment taxes withheld from workers, and taxes and premiums paid by employers have not been paid in full to vendors or turned over to the Internal Revenue Service (IRS).
The IRS may uncover the scam while the PEO is still operating. Oftentimes the company, or group of companies, has quietly wound-down with tax obligations still owing and criminal tax charges pending.
Unfortunately, business owners may discover they have a large payroll tax issue when the IRS seeks payment of past-due tax liabilities. A PEO could provide valuable services to your company. If considering an employee-leasing service, careful investigation of your vendor may keep you out of an IRS criminal investigation later.
Speak with an experience criminal defense attorney if facing tax litigation
If facing a civil or criminal tax audit, get skilled legal advice to protect your interests. The tax lawyers at Robert J. Fedor, Esq., LLC provide aggressive legal defense if you are involved in an employment leasing business or facing a large payroll tax liability. We have offices in Chicago and Cleveland, and work with clients locally and abroad. Call 800-579-0997 or contact us today.
