Hiring Seasonal or Part-Time Employees? Don't Overlook These IRS Rules
Summer often means hiring extra help. Whether you're bringing on students, temporary workers, or part-time employees, it's important to understand that these workers generally have the same federal tax requirements as full-time employees.
The IRS recently reminded employers that seasonal and part-time workers are employees for tax purposes, and employers must follow the same payroll tax rules that apply to any other employee.
Four Things Every Employer Should Know
1. Have Every Employee Complete Form W-4
All new employees should complete Form W-4 so you can withhold the correct amount of federal income tax from their wages.
2. Withhold and Pay Payroll Taxes
Seasonal and part-time employees are generally subject to the same federal income tax withholding, Social Security tax, and Medicare tax. Don't assume that working only a few months changes these requirements.
3. Classify Workers Correctly
A temporary employee is not automatically an independent contractor. If you control how, when, and where the work is performed, the worker is generally an employee. Misclassifying workers can result in significant IRS penalties.
4. Seasonal Employers May Have Different Form 941 Filing Requirements
Businesses that only operate during certain times of the year may not need to file quarterly payroll tax returns during quarters when no wages are paid. Employers should indicate that they are seasonal employers when filing Form 941 so the IRS knows returns may not be required every quarter.
Don't Let Temporary Employees Create Permanent Tax Problems
Hiring extra help can be great for your business, but payroll mistakes can become expensive. Setting up payroll correctly from the beginning helps avoid notices, penalties, and unnecessary headaches later.
The article is meant for informational purposes only. Please contact me directly to discuss how this applies to your individual tax situation.