Filing Annual Taxes with Our PEO

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Many accountants / tax preparers are very confused by PEO’s and how to enter PEO transactions into their tax software.  There’s 2 ways they can do this: All “wages” / “payments” made to the PEO (from your company bank account) are labeled as “PEO labor expenses”.  They are entered as a single line item. Imagine if your company hired Construction Company ABC to build a office complex. Your company considers that payment as a business expense and moves on.  The details of what Construction Company ABC did with that payment is not relevant. The easiest way to do this is simply add up ALL payments made to Fellow Travelers, and label it as “PEO labor expenses” or some similar labeling.

IF your accountant does not like a general “PEO labor expenses” label, they can itemize everything as wages paid by YOUR company and ignore the fact that the Fellow Travelers EIN shows up on the tax filings. You can itemize the “payroll” costs from the “benefits / insurance” costs if you’d like as well.  We send you an invoice for each.  Your tax preparer should pretend that the tax forms shows your company EIN and not Fellow Travelers. The IRS has records of this and will not confuse them. Fellow Travelers files additional tax schedules showing each client EIN and tax amounts.  When the IRS sees our EIN, they know it leads to another book they have to open to view your company tax info. To the IRS, our EIN is essentially a desktop folder that opens to a lot of other folders, one of which is your tax info / filings.  If you are a company of more than one person, you should have access to reports via the online payroll system that your tax preparer can use. If you are one person , your personal statements should be adequate to get itemized information for your accountant / tax preparer.

When it comes to PPP loans and other subsidies, the PEO labor expense DOES count as “wages” paid by YOUR company. The IRS has records of this via form 941 schedule R and the annual form 940 filing. Working with our PEO does not disqualify you from any government aid programs.

P.S. Annual state wage tax filings are done by Fellow Travelers for most states.  You may have to cancel your state taxpayer ID number or file returns with zero tax liability as they are reported & paid by Fellow Travelers.

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