Tuesday, December 01, 2009

Looming Deadline for PEO UI election in Colorado

PEOs with operations in Colorado are facing a looming deadline to make a one-time election whether to pay unemployment insurance taxes on their own account & rate, or to pay the UI taxes on the account/rate of their client companies.

2008 amendments to the Colorado PEO statute, had established that PEOs were to be treated as the sole employer for UI tax purposes. However, Colorado Senate Bill 09-258 effectively reverses that change, and instead imposes a "gotcha."

PEOs must file a written designation by 12/31/2009 electing to pay the UI taxes on their own account/rate. If a PEO fails to meet the 12/31 deadline to make a written election to pay on their own account, then the new statute states that the PEO has made an irrevocable election to pay on the client accounts/rates. In other words, if you miss the deadline there is no chance to make a change later.

If you do elect to pay on the PEO basis, SB 09-258 does allow a one-time later choice to report & pay on the client basis. However, once you elect to pay on a client basis, there is no going back.

Also, SB 09-258 makes the election binding on ALL of the PEO's entities under common ownership, managment or control. In other words, a PEO group cannot have two Colorado PEOs - one that pays UI taxes on the PEO account/rate and a second Colorado entity that pays UI taxes on the client account/rate.