Glossary
Certified PEO
A certified PEO (CPEO) is a professional employer organisation the IRS has certified under section 7705 of the Internal Revenue Code. For wages it remits, a CPEO is treated as the employer for federal employment tax, with no other entity treated as the employer.
Reviewed by Teamed's in-house employment-law team·Last updated 20 October 2026
Also known as: Certified Professional Employer Organisation, IRS-certified PEO
What is Certified PEO?
The IRS describes the CPEO programme this way: PEOs handle payroll administration and tax reporting for their business clients, and a certified professional employer organisation (CPEO) is one that applied for certification and that the IRS has certified as meeting the requirements. The programme is voluntary. Congress created it in the Tax Increase Prevention Act of 2014 (section 7705 and section 3511 of the Internal Revenue Code).
Becoming and remaining certified means meeting the background, experience, business location, financial reporting, tax compliance and bonding requirements in the statute and regulations. To be eligible, a PEO must be a business entity with at least one physical business location in the United States.
The practical effect sits in section 3511. A CPEO is treated as the employer, and no other entity is, of any worksite employee, but only for the remuneration the CPEO remits. The IRS notes that many organisations function as PEOs without being certified.
Who certifies PEOs, and how do you check?
The IRS runs the CPEO programme. It publishes a public list of currently certified CPEOs and of CPEOs whose certification has been suspended or revoked, so a customer can verify a provider's status on IRS.gov.
Check the IRS public listing before you sign, not the provider's own page. Source: IRS, about the certified professional employer organization programme, read 20 October 2026.
What does IRS certification require?
The IRS says a CPEO has met the background, experience, business location, financial reporting, tax compliance and bonding requirements in the statute and regulations. Eligibility includes being a business entity with at least one physical business location in the United States.
The IRS also looks for a history of financial responsibility, organisational integrity and tax compliance. Applying takes four steps in order: individual identity verification, a responsible individual personal attestation, creating a controlled group, and the CPEO application. Source: IRS, certified professional employer organization, read 20 October 2026.
What is the difference between a certified PEO and a non-certified PEO?
A certified PEO is treated by section 3511 as the employer, and no other entity is, of any worksite employee, but only for the remuneration the CPEO remits. A non-certified PEO has no such status, and the IRS says the client typically remains the common law employer.
The IRS says an agreement with a CPEO affects the employment tax liabilities of both the CPEO and its customers, and points to the regulations for the detail. Read them before you rely on the shift. Source: IRS, third party payer arrangements, page updated 9 October 2026.
Key facts
- What section 3511 provides
- A CPEO is treated as the employer, and no other entity is, of any worksite employee, but only for remuneration the CPEO remits.Section 7705 sets the certification process and defines the term. The IRS began accepting applications in July 2016.Source: IRS, third party payer arrangements: professional employer organizations (page updated 9 October 2026; read 20 October 2026)· verified 2026-10-20
- CPEO programme
- Voluntary, created by the Tax Increase Prevention Act of 2014, enacted 19 December 2014.A PEO must be a business entity with at least one physical business location in the United States to be eligible.Source: IRS, certified professional employer organization (read 20 October 2026)· verified 2026-10-20
Certified PEO vs non-certified PEO
| Certified PEO | Non-certified PEO | |
|---|---|---|
| Who is the employer for federal employment tax? | The CPEO, for the remuneration it remits (section 3511) | Typically the client, as common law employer |
| IRS oversight | Certified by the IRS, with a public listing | No IRS certification |
| Requirements met | Background, experience, location, financial reporting, tax compliance and bonding | None set by the IRS programme |
Frequently asked questions
Is every PEO a certified PEO?
No. Certification is voluntary, and the IRS notes that many organisations function as PEOs without becoming certified. Check the IRS public listing of certified PEOs rather than the provider's own claim.What is the main benefit of using a CPEO?
Under section 3511 the CPEO, not you, is treated as the employer for federal employment tax on the wages it remits. The IRS says an agreement with a CPEO affects the liabilities of both sides, so read the regulations it points to.Does CPEO status matter outside the United States?
Generally not. CPEO certification is part of US federal tax law. Elsewhere the question is usually who the legal employer is under local law, which is what an employer of record answers.
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Vetting a PEO or EOR provider?Last verified 2026-10-20