S-Corp has a professional employer organization process their payroll. Where to report wages & payroll tax

[JTW54]

Where should I report the wages and payroll taxes on the 1120-S when the S-Corp has a professional employer organization, (PEO) process their payroll?  The S-Corp has no payroll or payroll taxes being reported under their employer ID number.  The PEO reports the payroll and pays the taxes under their federal ID number instead.  Wouldn't this be a target for an audit?  Does anyone have any experience with this? 

[itonewbie · Accepted solution]

There is no ambiguity about this arrangement as the final regulations are clear that vendors such as PEOs are precluded from taking into account wages they pay on behalf of or with respect to other employers' common law employees.  The s-corp will report wages paid to those individuals via the PEO but only if they are your client's common law employees or officers.

See §1.199A-2(b)(2)(ii).

[JTW54]

itonewbie, 

Thank you for your response.

[itonewbie]

Glad it helps, @JTW54!