PEOs and SEBA: The Importance of the Small Business Efficiency Act
Source: PEOCompare Blog
As PEOs emerge as an important part of any small business, the tax code has not necessarily followed suit. In today’s market, the primary function of many PEOs is to handle payroll responsibilities: paying employees, handling taxes, etc. etc. If a company doesn’t have a PEO then it must calculate how much money to withhold for Social Security, Medicare, and income tax, then send in these payments in a timely fashion or be slapped with a fine. This can be very time consuming and does nothing to grow a company. As a result, payroll is one of the major selling points of a PEO, because it takes the burden of dealing with overwhelming paperwork and deadlines off the shoulders of the business owner which allows him or her to focus more on generating revenue.
SEBA, the Small Business Efficiency Act, was introduced in July 2011 to the House of Representatives because there is uncertainty about how withholding and remittance of employment taxes applies to the PEO environment. Because this industry is relatively new, tax law has not adapted to it yet. In turn SEBA, also known as H.R. 2466 and S. 1908, works to improve the PEO/Small business relationship and looks to clarify liabilities in the remittance of payroll taxes. According to NAPEO, the bills would solve key issues in the field such as:
- The ability for PEOs to collect and pay federal payroll taxes
- Facilitate payroll tax compliance in the small business community
- Allowing a client to fulfill its payroll tax obligation when it remits a payment to a PEO
- Create a certification process for PEOs that would provide security to small businesses when choosing a PEO.
NAPEO is urging all members of the business community to write into their Congressman or Congresswoman and urge them to cosponsor this pivotal bill. For more information about how to get in touch with your Congress person and how to spread the word about SEBA, visit this site sponsored by NAPEO.