Federal 2010 Budget Provisions Effect Employee Leasing and PEO Arrangements.

Bruce Silver
Employers Rx LLC

President Barak Obamas recently announced 2010 budget proposal contains some payroll-related provisions that will have a major impact on the way that payroll taxes are reported after December 31, 2009.
Currently, there is uncertainty as to whether the employee leasing company or its client is liable for unpaid federal employment taxes arising with respect to wages paid to the client’s workers. When an employee leasing company or professional employer organization files employment tax returns using its own name and employer identification number, but fails to pay some or all of the taxes due, or when no returns are filed with respect to wages paid by a taxpayer that uses an employee leasing company, there can be confusion as to how federal employment taxes are assessed and collected.

The proposal establishes standards for holding employee leasing companies jointly and severally liable with their clients for federal employment taxes. The proposal also sets standards which will place responsibility for, and hold employee leasing companies and PEOs solely liable, for payment of taxes in some cases. The provision would be effective for employment tax returns required to be filed with respect to wages paid after December 31, 2009.