IRS Approves First Group of Certified Professional Employer Organizations
The IRS has just certified 84 organizations that applied for voluntary certification as a Certified Professional Employer Organization or CPEO. Organizations like this are typically responsible for payroll functions and tax reporting for their clients. The legislation for this was passed in late 2014, so this is legislated and constitution under federal law.
The IRS goes on to say:
Certification affects the employment tax liabilities of both the CPEO and its clients. A CPEO is generally treated as the employer of any individual performing services for a client of the CPEO and covered by a CPEO contract between the CPEO with the client, but only for wages and other compensation paid to the individual by the CPEO.
In order to get certification the CPEO must meet tax compliance, background, experience, business location, financial reporting, bonding and other requirements.