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Recently, the IRS has announced its nonacquiescence with a ruling made by the Eleventh Circuit Court in Trinet Group, Inc. v. United States, CA-11, which ruled that the professional employer organization (rather than the client) has “control over the payment of wages” and was permitted to claim the IRC Sec. 45B credit for employer FICA tax paid with respect to employee cash tips NOT the client. So what does this mean for the PEO industry?
Matt Munn, national PEO practice leader contends that this just muddies the waters for PEOs when it comes to handling their tax filings. “This ruling is extremely confusing for PEOs and the IRS’s position makes it even worse.” “Without an industry standard, this almost becomes a case by case basis, and in cases that fall within the jurisdiction of the Eleventh Circuit, the Court’s ruling would have precedence, so there are essentially two sets of rules.”
With the latest ruling from the Eleventh Circuit Court and the IRS’s position, it is extremely important to consult with your tax specialist to ensure that your business is applying the correct treatment to specific tax credits and incentives.