SECTION 8. PROCEDURES — Internal Revenue Bulletin 2023-13

MAINTAINING CERTIFICATION AS A CPEO

.01 In general . To maintain certification, a CPEO must meet the applicable requirements described in § 301.7705-2, this revenue procedure, and any applicable subsequent guidance. In addition, any responsible individuals of the CPEO must meet any requirements applicable to them that are described in § 301.7705-2, this revenue procedure, and any applicable subsequent guidance. Except as otherwise provided in this revenue procedure or other guidance, the information and documents required in sections 8.02(1) and (2) and 8.03 through 8.05 must be submitted electronically via the CPEO’s IRS Online Registration System account. Only an application submitter can submit the information and documents required in sections 8.02(1) and (2) and 8.03 through 8.05. .02 Annual verification . (1) In general . Consistent with section 7705(b)(5) and § 301.7705-2(j), to maintain its certification, a CPEO must submit through its IRS Online Registration Sys

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tem account a properly completed and executed online annual verification. CPEOs that are members of a controlled group must each submit a separate annual verification. The due date for submitting the annual verification is 30 days before the anniversary of the date (month and day) on which the CPEO’s certification became effective.

(2) User fee . Consistent with section 7528(b)(4), upon submission of the online annual verification, the individual that submits the verification on behalf of the CPEO will be automatically directed to pay a user fee in the amount of $1,000. No CPEO annual verification will be processed until the IRS receives the user fee. Once processing of the annual verification has begun, the user fee will not be returned.

(3) Background check and tax compli- ance check . As part of a CPEO’s annual verification, the IRS may investigate the accuracy of statements and representations made by a CPEO and its responsible individuals by conducting background checks, including checks on tax compliance, criminal background, professional experience, credit history, professional sanctions, and other relevant facts. By submitting an annual verification, a CPEO and its responsible individuals agree to provide the IRS with such additional information as the IRS may request to facilitate its background investigations. A CPEO and each of its responsible individuals must take such actions as are necessary to authorize the IRS to conduct background checks and to investigate the accuracy of statements and submissions. This may include waiving confidentiality and privilege in situations in which the IRS would otherwise be prevented from obtaining or confirming information necessary to evaluate a CPEO’s continued qualification for certification from relevant third parties (such as former employers) because of the existence of confidentiality, non-disclosure, or similar agreements. Failure to provide such information or take such action may result in revocation of certification.

.03 Bond requirements . (1) In general . After the initial posting of a bond as provided in section 7705(c), § 301.7705-2(g), and section 6.02, a CPEO must continue to post a bond (or bonds, as described in section 8.03(3))

from a qualified surety for the payment of federal employment taxes, using Form 14751 through its IRS Online Registration System account, in the amount described in § 301.7705-2(g)(2) and this section 8.03, for each period beginning on April 1st of any calendar year and ending on March 31st of the following calendar year (the bond period). As prescribed by § 301.7705-2(g)(2)(i), the amount of the bond (or bonds, as described in section 8.03(3)) with respect to the bond period must be at least equal to the greater of five percent of the CPEO’s liability under section 3511 during the preceding calendar year (up to $1,000,000) or $50,000. See § 301.7705-2(g)(2)(ii) for special rules applying to a CPEO in its first or second year of certification. The bond, any riders thereto, and any strengthening bonds posted to satisfy the requirements of section 8.03(3), are considered one continuous obligation of the surety for unpaid tax liabilities accrued by the CPEO under subtitle C from the effective date of the bond until the bond is superseded, as described in section 8.03(3), or cancelled, as described in section 8.03(4) (the term of the bond).

(2) Controlled groups . In the case of a controlled group in which more than one member of the controlled group is a CPEO, all CPEO members of the controlled group are required to be covered by the same bond in the amount required by § 301.7705-2(g)(2), applied as if all such CPEO members were one organization. CPEOs in a controlled group should submit Form 14751 once for all CPEOs in the controlled group through their controlled group’s IRS Online Registration System controlled group license.

(3) Increase in bond amount . By March 1st in any calendar year, a CPEO must determine if an increase in bond amount for the new bond period beginning on April 1st of that calendar year is necessary and, if so, increase the amount of the bond covering the new bond period. That is, if five percent of a CPEO’s liability under section 3511 (or other applicable federal employment tax liability pursuant to § 301.7705-2(g)(2)(ii)) for the preceding calendar year (up to the $1,000,000 maximum liability) exceeds the current amount of the bond, the CPEO must increase the amount of its bond with respect to the

new bond period beginning on April 1st. To increase the amount of the bond, the CPEO must submit through its IRS Online Registration System account a properly completed and executed Form 14751, or such other form or document required by the IRS in the instructions for Form 14751 or further guidance, by March 1st of the calendar year in which the new bond period begins. The CPEO must also increase the amount of its bond if, at a later point in the bond period, the CPEO or the IRS determines that the CPEO’s liability under section 3511 (or other applicable federal employment tax liability pursuant to § 301.7705-2(g)(2)(ii)) for the preceding calendar year was higher than the amount reported and paid and on which the bond amount for the bond period was based and makes an adjustment or assessment reflecting such determination. To increase the amount of its bond due to an adjustment or assessment, the CPEO must submit through its IRS Online Registration System account a properly completed and executed Form 14751, or such other form or document required by the IRS in the instructions for Form 14751 or further guidance, within 30 days of the date of the adjustment or assessment. To increase the bond amount, a CPEO may amend an existing bond through the use of a rider, or post a strengthening, superseding, or new bond, as applicable.

(a) A rider is an amendment to an existing bond that increases the bond amount. The rider must apply to liabilities that arise on or after the effective date of the bond that the rider amends. The surety remains liable under the existing bond, as amended by the rider, for the assessment and collection periods applicable to the CPEO under sections 6501 and 6502, respectively, for any taxable period that occurs during the term of the bond unless and until the bond is superseded.

(b) A strengthening bond is an additional bond posted in the incremental amount of the increase so that the strengthening bond together with the existing bond equal the total required bond amount. The strengthening bond must apply to liabilities that arise on or after the effective date of the bond it strengthens. Both the strengthening bond and the bond it strengthens must remain in effect, and the surety remains liable under both bonds

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for the assessment and collection periods applicable to the CPEO under sections 6501 and 6502, respectively, for any taxable period that occurs during the term of the bonds, unless and until the bonds are superseded.

(c) A superseding bond is a bond posted for the total required bond amount, not just the incremental increase. Upon execution of the superseding bond, the superseded bond is no longer in effect, and the surety that provided the superseded bond is no longer liable under the superseded bond. The superseding bond must apply to liabilities that arise on or after the effective date of the superseded bond.

(d) A new bond is a bond posted for the total required bond amount and may only be posted upon the CPEO’s initial certification or immediately following cancellation of an existing bond. In the case of a cancellation of an existing bond, the effective date of the new bond must be no later than the effective date of the cancellation of the existing bond, and the surety providing the existing (now cancelled) bond remains liable for liabilities that accrued during the term of the cancelled bond for the assessment and collection periods applicable to the CPEO under sections 6501 and 6502, respectively, with respect to any taxable period that occurred during the term of that bond.

(4) Cancellation of bond . Consistent with § 301.7705-2(g)(4), a bond may be cancelled by the surety only after the surety gives written notice of cancellation to the IRS and the CPEO in the manner provided in the instructions for Form 14751 or any applicable subsequent guidance. Similarly, a bond may be cancelled by the CPEO only after the CPEO gives written notice of cancellation to the IRS in the manner provided in the instructions for Form 14751 or any applicable subsequent guidance. If a CPEO either receives a notice of cancellation from the surety provider of its bond, or gives written notice to the IRS of the CPEO’s intent to cancel the bond, the CPEO must also submit to the IRS through its IRS Online Registration System account a “Notification of Cancelled Bond,” which can be any scanned document or memo providing the name of the surety for the cancelled bond, the cancelled bond number, and the effective date of cancellation. The CPEO must also

post a new or superseding bond for the required amount by submitting Form 14751 no later than 30 days prior to the effective date of the cancellation of the previous bond. If a new bond is provided, it must be effective no later than the effective date of the cancellation of the previous bond. If a superseding bond is provided, it must be effective as of the effective date of the previous bond.

(5) Changing surety companies . When changing surety companies, a CPEO must cancel the existing bond with its current surety company in accordance with the requirements in Form 14751. Additionally, a CPEO must provide notice of the cancellation to the IRS through its IRS Online Registration System account and post a new or superseding bond in accordance with the requirements in section 8.03(4).

(6) Loss of qualified surety . If the surety provider of a CPEO’s bond no longer meets the requirements for a qualified surety, the CPEO must post a new or superseding bond with a qualified surety for the required amount by submitting Form 14751 via the IRS Online Registration System no later than 30 days after notification that the previous surety no longer meets the requirements of a qualified surety.

.04 Submission of annual audited fi- nancial statements .

(1) Copy of financial statements, CPA opinion, and working capital statement . By the last day of the sixth month after the end of each fiscal year of the CPEO (the audit date as defined in section 7705(c) (6)) and beginning with the first fiscal year that ends after the CPEO’s effective date of certification, a CPEO must submit through its IRS Online Registration System account a copy of its annual audited financial statements for the fiscal year. With its annual audited financial statements, a CPEO must submit a CPA opinion described in section 2.05(2) (as applied to a CPEO rather than a CPEO applicant) and a working capital statement described in section 2.05(3) and (4) (as applied to a CPEO rather than a CPEO applicant).

(2) Annual audited financial statements for controlled groups . In the case of a controlled group in which more than one member of the controlled group is a CPEO, all CPEOs in the controlled group must submit through the controlled group’s IRS

Online Registration System controlled group license the annual audited financial statements described in section 8.04(1), with an accompanying CPA opinion described in section 2.05(2) (as applied to a CPEO rather than a CPEO applicant), on a combined or consolidated basis for all CPEOs in the controlled group, rather than for the CPEO individually. Although a CPEO is not required to provide a copy of its separate financial statements as part of its submission, if the financial position of a CPEO is unclear from the combined or consolidated financial statements of the controlled group of which the CPEO is a member, the IRS may request additional financial information that is needed to evaluate the CPEO’s position, such as the annual balance sheet, income statement, and statement of cash flow of the individual CPEO.

(a) The combined or consolidated annual audited financial statements provided pursuant to this section 8.04(2) may, but are not required to, also include all members of the controlled group that are not CPEOs. The name and EIN of each member of the controlled group that is included within the consolidated audited financial statements of the controlled group submitted (including each member that is not a CPEO) must be listed in the CPA opinion, a Note to the Financial Statements covered by the CPA opinion, or in a separate attachment signed under penalties of perjury by a responsible individual of any one of the CPEOs in the controlled group.

(b) A CPEO that is a member of a controlled group of which other members are CPEOs must provide, in the Note to the Financial Statements covered by the CPA opinion, a statement that the individual CPEO’s financial statements reflect positive working capital or, if the requirements of section 2.05(4) are met, reflect negative working capital, with the statement in either case setting forth in detail a calculation of the individual CPEO’s working capital. If it is unclear whether the CPEO has positive or negative working capital for the last quarter of the fiscal year based on the combined or consolidated financial statements of the controlled group of which the CPEO is a member, the IRS may request additional financial information on an individual CPEO basis. The status of other CPEOs in the controlled group

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is not affected if the CPEO’s certification is suspended or revoked if the reason for the suspension or revocation is due to the CPEO’s working capital statement described in section 2.05(4) reflecting negative working capital and the CPEO failing to meet the exception described in section 2.05(4). .05 Submission of quarterly asser- tions, attestations, and working capital statements .

(1) Quarterly assertions, attestations, and working capital statements . By the last day of the second month after the end of each calendar quarter, a CPEO must submit through its IRS Online Registration System account an assertion, as described in section 2.06(1) (applied to a CPEO rather than a CPEO applicant), that it has withheld and made deposits of all federal employment taxes for which the CPEO is liable for the quarter; an examination level attestation from a CPA, as described in section 2.06(2) (as applied to a CPEO rather than a CPEO applicant), stating that this assertion is fairly stated in all material respects; and a working capital statement, as described in section 2.06(3) (as applied to a CPEO rather than a CPEO applicant).

(2) Quarterly assertions, attestations, and working capital statements for con- trolled groups . In the case of a controlled group in which more than one member of the controlled group is a CPEO, each CPEO in the controlled group must submit for each calendar quarter the assertion described in section 2.06(1) (as applied to a CPEO rather than a CPEO applicant) and the examination level attestation described in section 2.06(2) (as applied to a CPEO rather than a CPEO applicant) on a combined or consolidated basis for all CPEOs in the controlled group, rather than for the CPEO individually. The assertion must contain the name and EIN of each CPEO in the controlled group. However, the working capital statement described in section 2.06(3) (as applied to a CPEO rather than a CPEO applicant) must relate to the CPEO alone and must not be prepared on a combined or consolidated basis with other members of the controlled group. For purposes of the requirements of section 2.06(3), if it is unclear whether the CPEO has positive or negative working capital for the last quarter of the fiscal

year based on the combined or consolidated annual audited financial statements of the controlled group of which the CPEO is a member, the IRS may request additional financial information about the individual CPEO. The status of other CPEOs in the controlled group is not affected if the CPEO’s certification is suspended or revoked if the reason for the suspension or revocation is due to the working capital statement described in section 2.06(3) reflecting negative working capital and the CPEO failing to meet the exception described in section 2.06(3).

.06 Reporting Requirements . (1) Commencement and termination of contracts . A CPEO must report the commencement or termination of any CPEO contract between the CPEO and a customer, or any service agreement described in § 31.3504-2(b)(2) between the CPEO and a client, and the name and EIN of such customer or client, using Form 8973, Cer- tified Professional Employer Organiza- tion/Customer Reporting Agreement .

(a) Except as provided in section 8.06(1)(b), a CPEO must submit a Form 8973 within 30 days of the commencement of any CPEO contract or service agreement described in § 31.3504-2(b)(2) (including the conversion of an existing service agreement described in § 31.35042(b)(2) to a CPEO contract and vice versa). For more information on where to send the Form 8973, see the Instructions for Form 8973.

(b) To provide a newly certified CPEO with sufficient time to complete Forms 8973 for clients with whom it has had service agreements prior to certification as a CPEO (existing clients), a CPEO has six months from the date of its notice of certification to submit Forms 8973 with respect to the commencement of any CPEO contracts with existing clients (including the conversion of a service agreement described in § 31.3504-2(b)(2) with an existing client to a CPEO contract) or the commencement of any service agreements described in § 31.3504-2(b)(2) with existing clients (including the continuation by a newly certified CPEO of a service agreement described in § 31.3504-2(b)(2) with an existing client).

(2) prior to submission of the form to the IRS to report the commencement of the service agreement. The IRS recognizes, however, that a CPEO might occasionally experience difficulty in obtaining a signature from a client subject to a service agreement described in § 31.3504-2(b)(2). In these limited situations, the CPEO must still submit Form 8973, even though it is unsigned by the client, with the CPEO’s signature, by the applicable deadline. Because the CPEO did not obtain its client’s signature on the form, the CPEO must attach a written statement to the Form 8973 with the following information:

(i) The CPEO’s name, federal taxpayer identification number, mailing address, contact name, phone number, and e-mail address;

(ii) The name and federal taxpayer identification number of the client for which the associated Form 8973 is being submitted;

(iii) A detailed statement which provides the steps the CPEO has taken to meet its requirement to secure the client’s signature in a timely manner, and why the steps were unsuccessful; and

(iv) A statement (signed by an individual who has the authority to execute Form 8973 for the CPEO), with the following language: Under penalties of perjury, I de- clare that the information contained in this statement is true, correct and complete to the best of my knowledge and belief .

(d) The occasional submission by a CPEO of an unsigned Form 8973 with the attachment described above for a service agreement described in § 31.3504-2(b)(2) should not, absent other factors, result in suspension or revocation of the CPEO’s certification. However, the prevalence of unsigned Forms 8973 for a particular CPEO may reach a level of significance that poses a material risk to the IRS’s collection of federal employment taxes. If the IRS determines, in its sole discretion, that the prevalence or number of unsigned Forms 8973 for a particular CPEO does pose a material risk to the collection of federal employment taxes, the IRS will issue a notice of suspension and proposed revocation to the CPEO.

(e) Information relating to a client subject to a service agreement described in § 31.3504-2(b)(2) must be properly reported on Schedule R of Forms 940 and

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941 (or Form 943, if applicable), even if the client does not sign Form 8973.

(f) CPEOs are required to secure the signature of all customers subject to a CPEO contract (as described in section 7705(e)(2)) on Form 8973 prior to submission of the form to the IRS to report the commencement of the CPEO contract. The IRS recognizes, however, that a CPEO might occasionally experience difficulty in obtaining a signature from a customer subject to a CPEO contract. If a customer subject to a CPEO contract does not sign Form 8973, section 3511 does not apply to the customer. Consequently, the CPEO must report this customer as a client covered by a service agreement described in § 31.3504-2(b)(2), rather than as a customer covered by section 3511, on Form 8973 and on Schedule R of Forms 940, 941, and 943 (if applicable). The CPEO should submit Form 8973 (reporting the customer as a client covered by a service agreement described in § 31.35042(b)(2)), even though it is unsigned by the customer, with the CPEO’s signature, following the procedures set forth in section 8.06(1)(c), by the applicable deadline. (g) A CPEO must submit Form 8973 to the IRS within 30 days of the termination of any CPEO contract or service agreement described in § 31.3504-2(b)(2). Only the CPEO’s signature is required on the form to notify the IRS that a CPEO contract or service agreement has ended. In addition, though not required, the customer may also separately file its own Form 8973 to notify the IRS that its CPEO contract or service agreement with the CPEO has ended. If a customer separately files its own Form 8973 to notify the IRS that its CPEO contract or service agreement with the CPEO has ended, only the customer’s signature is required on that Form 8973.

(h) Form 8973 includes a CPEO Consent to Disclosure of Tax Information, on which the CPEO consents to the IRS disclosing to the customer or client identified on the Form 8973 information from the CPEO’s employment tax returns (for example, Forms 940 and 941) filed with respect to the customer or client identified on the Form 8973 and information about the CPEO’s certification. The CPEO consents to this disclosure only to the extent necessary to carry out the purposes of the CPEO program and will list on the CPEO

Consent to Disclosure of Tax Information the specific year(s) or period(s) for which consent to disclosure of employment tax return information is provided. The CPEO must file a new CPEO Consent to Disclosure of Tax Information before the end of the last year or period listed on the most recent prior consent for the customer or client, unless and until the CPEO submits a Form 8973 to report the termination of the applicable CPEO contract or service agreement. For more information, see Form 8973 and its instructions.

(2) Employment tax reporting . (a) A CPEO that is treated as an employer of a covered employee under section 3511 must meet all reporting and recordkeeping requirements described in subtitle F that are applicable to employers, in a manner consistent with that treatment. Specifically, with any Form 940, Em- ployer’s Annual Federal Unemployment (FUTA) Tax Return, Form 941, Employ- er’s QUARTERLY Federal Tax Return, and Form 943, Employer’s Annual Feder- al Tax Return for Agricultural Employees, that it files, a CPEO must file Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, Schedule R (Form 941), Allocation Schedule for Ag- gregate Form 941 Filers, and Schedule R (Form 943), Allocation Schedule for Aggregate Form 943 Filers, respectively, providing all the information required by the form and its instructions. In addition, Form 940, Form 943, and, except with respect to the first calendar quarter for which the CPEO is certified, Form 941, along with all required schedules, including Schedule R, must be electronically filed. A CPEO may file the Form 941, along with all required schedules, including Schedule R, on paper with respect to the calendar quarter that begins on the effective date of its certification. See the instructions for Form 940, Form 941, Form 943, Schedule R (Form 940), Schedule R (Form 941), and Schedule R (Form 943) for additional information on filing these forms.

(b) The IRS may waive the electronic filing requirements of this section 8.06(2) in case of undue economic hardship. The principal factor in determining undue economic hardship will be the amount, if any, by which the cost of electronically filing Form 940, Form 941, and Form 943 (and all applicable schedules) exceeds the cost

of paper filing. The IRS will also consider temporary software and technological issues that prevent the CPEO from electronically filing. Temporary generally means the problem is expected to affect the filing of only one return. Waiver requests claiming technological issues as the explanation for continual paper filing will be denied. In addition, the waiver will be subject to such terms and conditions regarding the method of filing as may be prescribed by the IRS. To request a waiver from electronic filing requirements, a CPEO must submit a written request specifying the type of filing (that is, the name of the form or schedule), as well as the period to which it applies. The request must also include a detailed statement explaining: (i) the steps the CPEO has taken in an

attempt to meet its requirement to timely file its return electronically. (ii) why the steps were unsuccessful. (iii) a description of the undue hard

then the CPEO must include the amount by which the cost of electronically filing employment tax returns and all applicable schedules exceeds the cost of paper filing. These incremental costs must be supported by a detailed computation. The detailed computation must include a schedule detailing the costs to file on paper and the costs to file electronically. (iv) what steps the CPEO will take to

ensure its ability to file future returns electronically and the date this is expected to be achieved. (v) a statement signed by an individual

authorized to sign the CPEO’s return, with the following language: Under penalties of perjury, I declare that the information contained in this waiver request is true, correct and complete to the best of my knowledge and belief. Electronic filing waiver requests must be filed at least 45 days before the due date of the return for which the CPEO is unable to electronically file. Additionally, a waiver request may be made only for the current taxable period, and waiver re

ship – economic, technological, or otherwise – that would result from complying with the electronic filing requirement. (A) If the hardship is economic,

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quests for taxable periods other than the current tax period will not be considered. The waiver request should be submitted through the CPEO’s IRS Online Registration System account. For additional information on waivers from electronic filing requirements, see the information provided on IRS.gov.

(c) A CPEO claiming and reporting employment tax credits on behalf of a customer must collect from the customer any information necessary to accurately claim the credits on the customer’s behalf.

(i) Either the CPEO or the customer may maintain the records to substantiate the customer’s eligibility for a credit. However, if the customer maintains the records, upon request by the IRS, the CPEO must obtain from the customer and provide to the IRS the records to substantiate the customer’s eligibility for the credit.

(ii) The CPEO will be liable for employment taxes that are due as a result of any improper claim of employment tax credits. For non-worksite employees, the customer may also be liable for employment taxes due as a result of improperly claimed employment tax credits.

(3) Reporting of material changes . A CPEO must notify the IRS of any change that materially affects the continuing accuracy of any previously made agreement or other information provided to the IRS (material change), including a modification or update to previously provided information, as well as new information (for example, a new responsible individual). A CPEO must notify the IRS of a material change no later than 30 days (45 days in the case of a new responsible individual) after the date of the material change. Notification must be provided through the CPEO’s IRS Online Registration System account. Material changes that must be reported as prescribed in this section 8.06(3) include, but are not limited to, the following items:

(a) Any change to the information previously provided by the CPEO as part of its initial application for certification or as part of a prior material change notification or annual verification that relates to business name or organization, address, fiscal year, licensing information, precursor entities, related entities, controlled group information, responsible individuals, or background information.

(b) Any change to the tax compliance information previously provided by the CPEO as part of its initial application for certification or as part of a prior material change notification or annual verification. When reporting material changes to the CPEO’s tax compliance information, the CPEO must specifically report both:

(i) The discovery of any failure (other than immaterial and isolated failures that do not reflect a meaningful lapse in compliance with federal employment tax withholding and deposit requirements) by the CPEO or any of its precursor or related entities within the last six years to timely and accurately file federal, state, or local tax or information returns (including federal employment tax returns) or pay any applicable federal, state, or local tax (including federal employment taxes), except that with respect to precursor entities that are no longer related entities, the CPEO must report only those failures of which it becomes aware and that relate to the precursor entity’s tax and reporting responsibilities connected with any assets that were transferred to the CPEO from the precursor entity; and

(ii) The assessment of fraud penalties by the IRS or a state or local tax authority against the CPEO or any of its precursor or related entities for any year, including for years before the CPEO was certified, except that with respect to precursor entities that are no longer related entities, the CPEO must report only those assessments of fraud penalties of which it becomes aware and that relate to the precursor entity’s tax and reporting responsibilities connected with any assets that were transferred to the CPEO from the precursor entity.

(c) Any change to any annual audited financial statements or annual working capital statements previously submitted to the IRS in accordance with section 2.05 or 8.04, and § 301.7705-2(e), that would require a restatement of previously submitted annual audited financial statements.

(d) Any change to the quarterly working capital statements previously submitted to the IRS in accordance with section 2.06 or 8.05, and § 301.7705-2(f), that causes working capital to no longer be positive or that causes a CPEO with negative working capital that met the requirements of section 2.06(3) (as applied to a

CPEO rather than a CPEO applicant) to no longer meet those requirements.

(e) The discovery by the CPEO of tax fraud or criminal activity in violation of federal, state, or local laws by a responsible individual.

(f) The CPEO, a related entity of the CPEO, or a responsible individual of the CPEO is charged with or convicted of any criminal offense under the laws of the United States or of a state or political subdivision thereof.

(g) The commencement of an active IRS criminal investigation of the CPEO, or the discovery by the CPEO of an active IRS criminal investigation of a related entity or a responsible individual.

(h) The occurrence of a transaction by which a person or group of persons gain control or effective control, directly or indirectly (including through control of the owner of the CPEO), of fifty percent or more of the stock or other ownership interests in a CPEO (determined by vote or value).

(i) The sale, transfer, or disposition of all or substantially all of the CPEO’s business, or the reorganization, spin-off or similar division, liquidation, dissolution, or closure of the CPEO business entity, directly or indirectly (including through sale, transfer, disposition, reorganization, spinoff, or division of the owner of the CPEO) regardless of whether the event is taxable or tax free.

(4) Reporting of material changes by responsible individuals . Responsible individuals of a CPEO must notify the IRS of any material changes to the information they submitted on the RIPA pursuant to sections 8.01 and 8.06(4), within 30 days of the change, by submitting an update through the online account of the responsible individual who submitted the previous RIPA. This reporting requirement is in addition to the requirement that the CPEO report material changes relating to responsible individuals, as provided in sections 8.06(3)(a), (e), (f), and (g). Material changes that must be reported as prescribed in this section 8.06(4) include—

(a) Any change to the responsible individual’s basic information, address, business information, related entities, and other attestations (such as attestations related to the denial, suspension, or revocation of licenses, registrations, or accreditations);

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(b) Disbarments; (c) Charges or convictions for any federal, state, or local criminal offense;

(d) IRS criminal investigations; (e) Any failures to file any required federal, state, or local tax or information returns, or to pay any required federal, state, or local taxes, in a timely or accurate manner;

(f) Initiation of a bankruptcy proceeding by the responsible individual; and

(g) Any assessments of the Trust Fund Recovery Penalty under section 6672 against the responsible individual.

(5) Reporting of new responsible in- dividuals . Each individual who, after the CPEO’s effective date of certification, becomes a responsible individual of the CPEO must, within 30 days of becoming a responsible individual, either, (i) submit an update through the individual’s online account adding the CPEO as a CPEO with which the responsible individual is associated (if the responsible individual had previously completed a RIPA for any CPEO); or, (ii) electronically submit a properly completed and executed online RIPA and submit fingerprints using Fieldprint, or by such other method of fingerprint submission provided for in applicable subsequent guidance, obtain an individual (INDV) number from the IRS, and provide this INDV number to the CPEO in the manner described on IRS.gov (if the responsible individual had not previously completed a RIPA). All requirements in section 8.06(5)(ii) must occur before the CPEO can update its responsible individual information.

(6) Reporting to customers . A CPEO must meet the following reporting requirements with respect to its customers:

(a) A CPEO must notify a customer in writing if its CPEO contract has been transferred to another person (or if another person will report, withhold, or pay, under such other person’s EIN, any applicable federal employment taxes with respect to the remuneration of any individuals covered by its CPEO contract with the customer) and provide the customer with the name and EIN of such other person no later than 10 days after the transfer or other applicable event.

(b) A CPEO must provide its customers with the information necessary to claim the credits specified in section 3511(d)(2)

and any other credits specified in further guidance, and the information necessary to properly report employee tips, as provided in section 6053(c)(8).

(c) If a CPEO’s certification is suspended or revoked, as described in section 9, the CPEO must provide written notice to each of its customers within 10 days of the date of such suspension or revocation, as provided in sections 9.03(1) and 9.09.

(d) If any covered employees are not, or cease to be, work site employees because they perform services at a location at which the eighty-five percent threshold described in section 7705(e)(3) is not met, the CPEO must notify the customer in writing within 30 days following the end of the applicable calendar quarter that the customer may also be liable for the federal employment taxes imposed on remuneration remitted by the CPEO to those covered employees.

(7) Information required in an agree- ment or contract between a CPEO and a client or customer .

(a) In the case of a service agreement described in § 31.3504-2(b)(2) that is not a CPEO contract (as a result of which the individuals covered by that service agreement are not covered employees), or if section 3511 does not apply to a CPEO contract in accordance with section 8.06(7)(b), the agreement or contract must notify, or be accompanied by a notification to, the client or customer that the service agreement or contract is not covered by section 3511 and does not alter the client or customer’s liability for federal employment taxes on remuneration remitted by the CPEO to the employees covered by the service agreement or contract.

(b) In the case of a CPEO contract, the contract must notify, or be accompanied by a notification to, the customer that section 3511 does not apply to a CPEO contract under the following circumstances- (i) The customer has a relationship to a CPEO described in section 267(b) (including, by cross-reference to section 267(f)) or section 707(b), except that “10 percent” shall be substituted for “50 percent” wherever it appears in the applicable sections;

(ii) The customer has commenced a CPEO contract with the CPEO but commencement has not been reported to the IRS in accordance with section 8.06(1);

(iii) The CPEO contract has been entered into by the CPEO while its certification has been suspended by the IRS; or

(iv) The certification of a CPEO has been revoked or voluntarily terminated but only for the period following the effective date of the revocation or voluntary termination, and in which case the notification required by section 8.06(6)(a) should be sent as required by sections 9.09 and 10.01.

(c) In situations in which a CPEO contract with a customer covers remuneration remitted by a CPEO to self-employed individuals, the CPEO contract must notify, or be accompanied by notification to, the customer that the remuneration remitted by the CPEO to any self-employed individuals is not covered by section 3511.

(8) Penalties and additions to tax . A CPEO is subject to the penalty under section 6652(n) for failure to make any report required by sections 3511 and 7705, and by § 31.3511-1(g), as well as the reporting requirements described in this section 8.06, and any applicable subsequent guidance. In addition, a CPEO is subject to the same penalties and additions to tax as any employer that fails to meet the applicable employment tax reporting requirements discussed in section 8.06(2), including but not limited to penalties and additions to tax under sections 6651, 6656, 6662, 6672, 6721, 6722, and 6723. However, the failure to file Forms 940, 941, or 943, as applicable, along with all required schedules, electronically, as provided in section 8.06(2), does not constitute a failure to file for purposes of the section 6651(a) (1) addition to tax or a failure to make a report for purposes of the section 6652(n) penalty. The consequence of any failure to file these forms and associated schedules electronically is the potential suspension or revocation of certification as a CPEO, addressed in section 9.