Reemployment Tax for Professional Employer Organizations

An Professional Employer Organizations (PEO) that chooses the client method must first register with the Department and get a reemployment tax (RT) account number. Each client company must also have a separate RT account number. The fastest way to register is using the online Florida Business Tax Application, which will guide you through an interactive interview. Or complete and submit a paper Florida Business Tax Application (Form DR-1 ).

Once the Department has issued an RT account number, the PEO can make the client method election online.

Once the PEO has registered and elected the client method (whether online or by paper), the PEO will then be able to enter (key or import) each client company's information online. Remember, under the client method each client company must have a separate reemployment tax (RT) account number.

The import file specification must include:

• ELC Information: DBPR License Number, Company Name, RT Account Number
• Client Information: FEIN, RT Account Number, Legal Entity Name, Mailing Address, City, State, ZIP, Leasing Start Date.

Note: The fastest way for a client company to register to get an RT account number is using the online Florida Business Tax Application, or complete and submit a paper Florida Business Tax Application (Form DR-1 ).

Employee information will only be required if the current PEO states that some or all of the client companies were previously reported by another PEO that had common ownership, management, or control with the current PEO at the time of the transfer.

If an PEO chooses the client method, a tax rate will be calculated for each client company. The PEO must use the calculated rate to electronically file and pay a separate Employer's Quarterly Report (Form RT-6 ) for each client company. An initial tax rate of .0270 (2.7%) will be assigned to client companies for whom the PEO has filed fewer than eight (8) chargeable quarters (generally it is 10 filing quarters), until an earned rate can be calculated. However, if the client company transferred from a related PEO, the mandatory transfer of experience provisions would apply according to Section 443.131(3)(g), Florida Statutes. The PEO will continue to file its own Employer's Quarterly Report (Form RT-6 ) for its internal employees using the tax rate assigned.

A PEO must notify the Florida Department of Revenue within 30 days after the initiation or termination of the company's relationship with a client company. PEOs should use the online website to add or terminate client companies.

Is an Employee Leasing Company (ELC) and a Professional Employer Organization (PEO) the same type of entity?

Yes, the names ELC or PEO are often used interchangeably.

If the PEO client already has a reemployment tax (RT) account number, does the client need to obtain a new RT number?

No.

If the client does not have an RT number, must the client obtain one?

Yes, if the PEO is electing the client method, all clients must obtain their own RT account numbers if they do not already have one assigned. The client must register using the Department's online Florida Business Tax Application, or complete and submit a paper Florida Business Tax Application (Form DR-1 ). The client should indicate the leasing arrangement in the application process.

Will the state set up an RT account number for the client?

No. The client must register for an RT account number with the Florida Department of Revenue.

The law requires that after the election to report and pay using the client method, the PEO must file and pay the Employer's Quarterly Report by approved electronic means. Will concessions be allowed if the PEO is in process but not yet able to report client level detail in electronic format?

No. Currently, any employer with 10 or more employees must report and pay electronically.

The law says the client company shall continue to report the nonleased employees under its own rate. Does "nonleased employees" refer to employees not covered under the PEO arrangement?

Yes.

If an employee leasing company chooses the new client method option, will all the clients under that leasing company move to that method, or do the leasing company's clients each have a choice about how leased employees will be reported?

The election applies to all the employee leasing company's current and future clients, for as long as the leasing company has a written agreement in effect with a client.

What is a Professional Employer Organization?

A professional employer organization (PEO) is a business that has a contract with one or more client companies (employers) to handle a client company's personnel-related matters, such as workers' compensation, payroll and payroll taxes, employee benefits, and reemployment assistance tax. A "client company" is an employer who has contracted with a PEO for the PEO to provide a worker or workers to perform services for the employer. The PEO is considered, for purposes of reemployment tax, to be the employer of the worker(s) provided to the client company. The PEO is responsible for filing quarterly reemployment wage and tax reports concerning their clients and paying any reemployment tax due. If you used the services of a PEO for all of your employees, you would no longer be considered an employer for purposes of Florida's reemployment tax.

Are PEOs required to have a special license in the State of Florida?

Yes, the PEO must have a valid and active license under Chapter 468, Florida Statutes. A PEO doing business in Florida must register with the Florida Department of Business and Professional Regulation (DBPR). Visit DBPR's website for more information about PEOs.

How do PEOs work?

The PEO manages all personnel-related functions, such as payroll and related taxes, benefits administration, and human resource functions, while the client company maintains control of all business decisions and operations. The PEO becomes the employer of record of the client company's employees for reemployment tax purposes.

Who is responsible for the filing and payment of Florida's reemployment tax in a PEO-client company relationship?

The PEO assumes responsibility and liability for filing the required reports and paying Florida's reemployment tax. Any payments (including wages, bonuses, or non-cash payments) to the workers must be reported by the PEO.

What options do PEOs have to pay reemployment taxes to the Department?

Florida law allows a PEO to choose one of two options for paying reemployment taxes to the Florida Department of Revenue: regular method or client method.

• Regular method - A PEO pays the tax due at the reemployment tax rate assigned to the PEO.
• Client method - A PEO may make a one-time election to report workers under the tax rate assigned to each client company of the PEO and pays the tax due at the rates assigned to each client company.

Once the reporting method has been chosen, it cannot be changed. If the PEO chose the client method of reporting, the client company's workers will be reported by the PEO at the initial tax rate until the client company has been chargeable for benefits for at least eight calendar quarters while being a client of the PEO. After the client company has been chargeable for benefits for at least eight calendar quarters, the PEO will receive an earned rate for that client and will pay the subsequent taxes due for that client company at the earned rate.

What happens to my reemployment tax rate if I leave a PEO?

When you leave a PEO, your rate may change depending on whether the PEO was a regular PEO or a client method PEO.

• Regular PEO - If the relationship between you and a regular PEO terminates, your tax rate will be based on the wage and benefit history experience you had prior to the relationship with the PEO, unless you have been with the PEO for at least two and one-half years, in which case you will be assigned the new employer rate.
• Client method PEO - If the relationship between you and a client method PEO terminates, you will retain the wage and benefit history experienced under the PEO.

How can I determine whether a PEO reports as a regular PEO or as a client method PEO?

The Department recommends you request information about how the PEO reports to the Department from the PEO when you are negotiating the service agreement.

What document am I required to file with the Department when I use a PEO?

When you use a PEO, you must complete and submit an Employer Account Change Form (Form RTS-3 ).

Is the PEO required to notify the Department when an employer joins a PEO or terminates the relationship?

Yes, a PEO must notify the Department within 30 days after the initiation or termination of the PEO's relationship with any client company.

What document am I required to file when I terminate my relationship with a PEO?

If you will continue to employ individuals in Florida, you must notify the Department in writing about the termination of your relationship with a PEO. You can mail, fax, or email the information (no specific form is required) to:

Florida Department of Revenue
PO Box 6510
Tallahassee FL 32314-6510
Fax number: 850-922-0859
Email: doc_mgr@floridarevenue.com

You may also need to complete a Florida Business Tax Application (Form DR-1 ) depending on the length of time you used the services of a PEO.

If you will no longer employ individuals in the State of Florida, you must either complete the Department's account change form online or download an Employer Account Change Form (Form RTS-3 ).

How can I get more information about PEOs?

For more information, contact the Department's Account Management section at 850-717-6628.