Yes. IRS certification carries a standing requirement to engage an independent CPA. A CPEO must submit annual audited financial statements accompanied by an unmodified opinion of a CPA stating that the statements are presented fairly and in accordance with GAAP, and the opinion must include a written declaration signed by the CPA that they are currently qualified. Either the opinion or a note to the financial statements must state that the CPEO's financial statements reflect positive working capital, or negative working capital where the limited conditions are met, and set out a detailed calculation. Separately, a CPA attestation is required on the CPEO's quarterly assertion regarding federal employment tax deposits.

The annual audited financial statements are due by the last day of the sixth month after the end of the CPEO's fiscal year, which is June 30 for a calendar-year CPEO. Quarterly assertions and the accompanying CPA attestations are due by the last day of the second month after the end of each calendar quarter, so the quarter ending March 31 is due May 31, June 30 is due August 31, September 30 is due November 30, and December 31 is due the end of February. Filings are submitted through the IRS Online Registration System for Professional Employer Organizations.

Specific failures can result in suspension of certification and the issuance of a notice of proposed revocation. A CPEO may request review of a proposed revocation, which can result in the suspension being lifted or in a notice of final revocation. Because CPEO status is what gives clients sole federal employment tax liability protection, revocation affects the commercial proposition itself rather than only imposing a cost. If a deadline has been missed or is at risk, the sequence that matters is engaging a CPA, completing the work, and filing, rather than waiting.

A Certified Professional Employer Organization has met IRS certification requirements under IRC Section 7705 and assumes sole liability for federal employment taxes on wages it pays to worksite employees, which gives client businesses certainty that they will not be pursued for those taxes a second time. Certification also removes wage base restarts when a client moves to the CPEO mid-year. In exchange, a CPEO accepts bonding, financial, and reporting obligations including audited financial statements, quarterly attestations, and working capital requirements. A non-certified PEO operates under traditional co-employment without those obligations and without the corresponding client protection.

The central difference is that gross billings are not revenue. Service fees must be separated from pass-through payroll, employment taxes, and benefit premiums, and whether the financials are presented gross or net depends on the co-employment agreement and where risk sits. Beyond that, PEO accounting involves client trust fund segregation, worksite employee data spanning multiple states, SUTA rates and wage bases that differ by jurisdiction, ACA and benefit reporting driven by worksite headcount, and frequently a multi-entity structure requiring intercompany allocation and consolidation. Working capital also carries regulatory weight for a CPEO rather than being purely a management metric.

Multi-state payroll tax exposure across SUTA, FUTA, and nexus rules; trust fund tax obligations where responsible persons can face personal liability under the Trust Fund Recovery Penalty; IRS CPEO certification standards including audited financials and quarterly attestations; state PEO licensing requirements that vary by jurisdiction and by size; Department of Labor exposure; and revenue recognition complexity around gross versus net presentation. SUTA dumping rules add a further layer on acquisitions, restricting when an experience rating can transfer between entities.

Several, from different bodies on different timelines. IRS examination focused on payroll tax compliance; Department of Labor audits; state PEO licensing reviews, which in many states require audited or reviewed financial statements; CPEO annual and quarterly filings for certified organizations; ESAC accreditation reporting for PEOs pursuing that route; employee benefit plan audits attached to Form 5500 where a sponsored plan crosses the participant threshold; and audits required by lenders or surety bond providers. Mapping which apply to a specific PEO is the first step in any engagement.

It depends on the plan and the participant count. A plan with 100 or more participants with account balances at the start of the plan year is generally treated as a large plan and must attach a report from an independent qualified public accountant to its Form 5500. Under the 80-120 participant rule, a plan with between 80 and 120 participants may file in the same category it used the prior year. For PEOs this can be complicated by how worksite employees are treated under the plan, which is worth confirming rather than assuming. GreenGrowth CPAs is a member of the AICPA Employee Benefit Plan Audit Quality Center.

Yes. An applicant must provide audited financial statements for the most recently completed fiscal year with an unmodified CPA opinion and the working capital statement, and an applicant that was not operating as a payroll services provider for all or part of that year has additional requirements covering related entities. Regardless of fiscal year end, an applicant has until the last day of the sixth month after fiscal year end to submit the statements, the opinion, and where applicable the separate working capital statement. We scope the audit against the application timeline so the financial statement work is not what holds up certification.

It depends on whether you are certified or applying, the number of entities and whether a controlled group is involved, worksite employee count, the states you operate in, the condition of your accounting records, and whether the engagement covers the quarterly attestation cycle alongside the annual audit. We scope a fixed fee after reviewing your prior-year financial statements, entity structure, certification status, and state footprint, so there are no surprises mid-cycle. If your timeline is not achievable we will say so on the first call rather than accepting the engagement and discovering it later.