What records support payroll deductions when a client uses a PEO?

Start with the PEO's annual and quarterly payroll summaries, employee-level wage reports, employer payroll tax reports, benefit detail, administrative fee detail, and the service agreement or contract. If the PEO is an aggregate filer, Schedule R allocation support may also be relevant.

The goal is to reconcile the PEO reports to the books and then to the return lines. A single cash payment to the PEO may contain wages, employer payroll taxes, benefits, retirement costs, and administrative fees. Those components should be separated before the return is prepared.