Earlier this year, I wrote you to help clarify the new tax reform laws as it relates to our PEO industry specifically. Today, we have finally received guidance from the Department of Treasury which confirms our original analysis. Below is a release from our trade association, NAPEO, in Washington, DC that has been working with us since January to help provide guidance for our clients:
Today, the U.S. Department of Treasury and the Internal Revenue Service (IRS) issued a notice of proposed rule making that contains guidance for pass-through entities that are clients of PEOs.
The guidance clearly states that eligible pass-through entities that are clients of a PEO can take the 20 percent tax deduction created by Section 199A of tax reform.
This guidance affirms what we have advocated this year: being a PEO client does not affect the eligibility of a pass-through entity for the 20 percent tax deduction in Section 199A of the tax code.
Relevant language of the rule can be found here.
I’m certain that you, as a business leader, are as thrilled as I am about the long-awaited clarity around this particular issue of tax reform. Please contact us with any questions that you or your tax advisor might have with regards to these new laws.