Outsourcing Payroll PEO

What if a borrower contracts a third party payer such as a Professional Employer Organization (PEO) to process payroll and report payroll taxes?

For borrowers who outsource their payroll to a PEO or other payroll provider, the borrower will need to acquire documentation that shows the amount of wages and payroll taxes reported to the IRS. More detail listed below.

Linked here and pasted below is the text from the official question and answer document published by the Department of the Treasury on April 10, 2020, which you should reference:

https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf

Below is the official question from Q10 as of April 10, 2020

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?

Below is the official answer from Q10 as of April 10, 2020

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.

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