PEO and ERC

I have one client utilizing a PEO. The PEO quite explicitly indicated in an email they would not be doing anything with ERC requests and have provided all the information I might need to do something about getting it for my client. It's right around $60,000 so we really want to do something. By the time we were able to start working on it for Q2 and Q4 2020, 941's were filed and according to the instructions for Form 7200, it can't be filed after the 941 has been filed and it can't be corrected. Part of Q2 and all of Q3 wages were covered by a PPP loan.

Today I had an email from the PEO asking us to provide copies of all of the 7200's filed or provided for this client. They are speaking with their attorneys seeking guidance from them on the ERC now. We only have a 7200 for January of this year which I''m just getting ready to send to the client. February and March will be paid from PPP2 funds. I know a lot of people with clients using PEOs have had problems getting them to respond to this. It sounds to me like they are getting kind of nervous about what they should be doing or have done. I completed 941X's for the client and provided info on the PEO in the explanation and made the client aware that it might get kicked back. So far we haven't heard anything on those.

Of course, having a rule that says once 941's are filed you can't file the required form 7200, and passing a bill in late December that included wages not covered by a PPP loan in the ERC and offering sketchy guidance as to how exactly all of that was supposed to come together, hasn't been helpful. I'm curious if anyone else dealing with PEOs is starting to hear from them?

As the EVP at a PEO and overseeing the tax department I can tell you that for PEOs the debacle that ensued when the CAA was passed was overwhelming.

My PEO took the stance of providing all of the updated information to our clients as we felt it our role as a partner with them to assist them in being educated as much as possible with regards to all of the CARES Act, FRCCA, CAA.

When the CAA was passed we sent all updated ERC information to our clients, you are correct in that the 7200 would NOT be applicable to any retroactive ERCs relating to 2020. We provided the clients with the data and instructed them to consult with their CPA/tax accountant/business advisor in order to determine eligibility and calculations of the eligible wages per the IRS guidelines. We vetted every clients submissions including having them provide proof of eligibility. We gave them a submission date deadline so that we could file the 2020 quarterly amendments for as many clients as possible at one time. This facilitated our internal process as well as ensuring that as many qualified clients as possible were filed as the IRS is so far behind that file additional amendments could be 4-6 months out as it is not recommended to file an amendment on top of an amendment that hasn't been processed by the IRS. Unfortunately, an individual 941X filed under a PEO clients own FEIN number will not be processed correctly as there is no original 941 under that FEIN to reference. The PEO is responsible for filing the amendments and this is addressed in the IRS guidelines from the initial ERC legislation passed in March 2020.

Unfortunately many PEOs did not want to take the extensive amount of time and effort to properly provide clients with options nor determine best practices with regards to the retroactive ERCs. This was a very tedious process but helping our clients who truly struggled during the closures took precedent. I hope the PEO your client is dealing with steps up and the good news is you have 3 years to file amendments. Best of luck!