If summertime is a busy time for your business, you may be ready to hire seasonal workers. Here are tax rules to keep in mind.
- Affordable Care Act exception. When you employ 50 or more full-time employees, you’re considered a “large employer” and are generally required to provide health insurance coverage or pay a penalty. However, the law provides an exception for seasonal workers, defined as those you employ for not more than 120 days during the prior calendar year. In general, your answer to two questions determines if you qualify for the exception. Did your workforce exceed 50 full-time employees for 120 days or fewer during the year? Were the employees in excess of 50 who were employed during that period seasonal workers? If both answers are yes, you’re generally not considered a large employer. For more details see Hiring for Summer? Know the ACA Rules.
- Employment taxes. Temporary workers are typically subject to the same employment tax rules as regular employees. You’ll generally have to withhold social security and Medicare taxes, as well as federal income tax from wages. You’ll also have to follow payroll tax deposit rules and employment return filing requirements.
- Employment tax returns. Special filing rules may apply when you only hire employees at a specific season of the year, such as summertime. For each quarter that you pay wages, you can check the box for “seasonal employer” on Form 941, Employer’s Quarterly Federal Tax Return. By notifying the IRS of your seasonal status, you’re not required to file returns for quarters when you have no wages or tax liability.
Please contact us for more information about payroll tax rules, recordkeeping requirements, and documentation for seasonal employees. We’re here to make sure that your busy summer season goes smoothly.