IRS 3504 Designation
Definition
An authorization allowing a third party (like a PEO) to file and pay employment taxes on an employer’s behalf.
What is IRS 3504?
Form 2678 gives PEOs and other agents the legal authority to act on behalf of an employer for certain federal tax matters. It’s a key part of a co-employment model, which is the basis of a PEO partnership.
Why is IRS 3504 Important for Employers?
- Ensures taxes are filed under the agent’s EIN
- Protects clients from tax mishandling
- Supports IRS recognition of the PEO arrangement
FAQs
Does this change the employer’s responsibilities?
No. While the PEO files under its own EIN, the client company retains responsibility for managing employees and maintaining compliance.
Why is IRS 3504 important for businesses using a PEO?
It provides tax compliance protection, clarity, and confidence that payroll taxes are being handled correctly by the designated agent.
How ExtensisHR Can Help
We act as your agent under IRS 3504 and:
- Manage payroll tax filings and payments
- Maintain detailed compliance records
- Represent your interests in audits and inquiries