PEO's and the Tax Savers Credit

[Guest Mbrockway]

A small employer is entiitled to a tax credit equal to 50% of the first $1,000 in expenses for plan administration and retirement education. A "small employer" is an employer whose plan covers at least one NHCE and has 100 or fewer ee's earning more than $5,000 each.

With that said, are co-employers of a PEO eligible for the credit? I would think that they would not because the "plan" has more than 100 ee's due to the other co-employers that have adopted into it.

Any thoughts/guidance is appreciated.

[Guest Mbrockway]

This must be a humdinger! TAG hasn't responded either.

Any response is appreciated. Thanks!

[Ron Snyder]

Since RP 2002-21 and other IRS positions make it clear that the client company (of the PEO firm) is the actual employer, a PEO plan is not a single plan but several small employer plans with a combined trust.

There is no reason the actual employer cannot take the tax credit even though the plan they adopted is maintained by a PEO firm.

[Guest Mbrockway]

Thank you!