AICPA Weighs in on Proposed IRS Regulations Regarding Certified Professional Employer Organizations

August 17, 2016

Washington, D.C. (August 17, 2016) – The American Institute of CPAs (AICPA) has weighed in with recommendations regarding proposed regulations (REG-127561-15) by the Internal Revenue Service (IRS) that establish the federal tax liabilities and other obligations of individuals applying for, receiving and maintaining certification as Certified Professional Employer Organizations (CPEOs). 

CPEOs provide outsourced human resources and payroll functions for client companies, which are typically small and medium-sized businesses.  CPEOs were created by Congress in December 2014, and the enacting statute charges the IRS with the responsibility for establishing a certification process. 

In its August 16 letter, the AICPA focused on the areas of the proposed regulations concerning certified public accountants (CPAs).  The letter makes recommendations and requests clarifications concerning the definition of a CPA, representation of the CPEO before the IRS by the CPA, working capital financial statement opinions and the responsibilities with respect to the quarterly assertions and attestations.  Included are:

  • An answer to a question in the proposed regulations about “whether the CPA independence guidelines or requirements of other governmental agencies or departments of industry self-regulatory bodies, as adapted for a CPA of a CPEO, would better ensure the impartiality of CPAs providing opinions on CPEO’s financial statements.”  The AICPA stated that “the AICPA’s Code of Professional Conduct is appropriate to provide for an independent audit and examination with regard to the CPEO process” and pointed out that the Code is familiar to all of its 412,000 members as well as the majority of CPAs in the country, whereas some of the other independence standards are not.
  • A recommendation to change the language in the proposed regulation related to the definition of a CPA from “Is duly qualified to practice in any state” to “Is duly authorized to practice by a state board of accountancy” to reflect CPA state licensure regulations under the National Association of State Boards of Accountancy.