The SBA has acknowledged that businesses who partner with a Professional Employer Organization (PEO), such as ESC, do not file the standard 941 and 940 payroll tax filings reports under their own employer registration numbers (EIN). The Treasury Department posted the following guidance in their PPP Frequently Asked Questions publication:
What if an eligible borrower contracts with a third-party payer such as a payroll provider or a Professional Employer Organization (PEO) to process payroll and report payroll taxes?
SBA recognizes that eligible borrowers that use PEOs or similar payroll providers are required under some state registration laws to report wage and other data on the Employer Identification Number (EIN) of the PEO or other payroll provider. In these cases, payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation. Relevant information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly Federal Tax Return, should be used if it is available; otherwise, the eligible borrower should obtain a statement from the payroll provider documenting the amount of wages and payroll taxes. In addition, employees of the eligible borrower will not be considered employees of the eligible borrower’s payroll provider or PEO.
If you are an ESC client, please contact your HR Business Partner if you would like a letter to provide to your lender that explains the PEO relationship and provides this additional guidance from the Treasury Department.