Professional employer organizations (PEOs) are businesses that provide employment-related services, such as onboarding new employees, processing and paying wages, and withholding, paying, and reporting applicable federal, state and local taxes and unemployment contributions with respect to wages. PEOs are often referred to as co-employers. In one case, a PEO claimed work opportunity credits and empowerment zone employment credits for employees providing services to other companies. These other companies were common law employers. The Tax Court said that only common law employers, and not PEOs, could claim employment-related tax credits. “A statutory employee who pays wages for services provided to another person is not Congress’s intended beneficiary of these credits.” #IdeaoftheDay
