Payroll Tax Tips for Seasonal Business Owners


payroll taxDuring periods of high sales activity, business owners may need to hire seasonal employees. For example, businesses that operate only during the summer, such as amusement parks, may rely on seasonal workers to handle day-to-day operations. On the other hand, year-round companies such as department stores or malls may only need seasonal workers during the holiday shopping season when revenue is at an all-time high. In either case, company owners who consider hiring seasonal employees should take care to comply with payroll tax procedures to make sure that they are following the law. Here are a few payroll pointers for seasonal business owners.

1. Make sure that your employees are eligible to work.

The first and most important tip is to make sure that your employees are qualified to work in the United States. Some businesses that operate during certain seasons, such as farms, may be tempted to hire inexpensive laborers without checking their documentation. However, this can lead to real trouble if the company is targeted for inspection by the federal government. Before hiring anyone, always consult the Social Security Number Verification Service to make that he or she has a valid Social Security number that matches their name.

2. Require seasonal workers to fill out W-4 forms.

Even though your seasonal employees will only work on a temporary basis, you'll still be required to withhold federal and state income taxes. This means that you'll need each of them to complete a federal W-4 form and a state W-4 form. On these documents, they will claim a marital status and a number of exemptions, which you'll use to deduct the appropriate amount of income tax from their pay. However, if you decide to take on employees who will work as independent contractors, you can avoid the sticky issue of tax withholding altogether. Hiring independent contractors, though, carries its own set of legal requirements, so consult the federal employee designation requirements before you begin the hiring process.

3. Familiarize yourself with the federal and state requirements for seasonal employees.

According to the Fair Labor Standards Act, seasonal employees are eligible for minimum wage and overtime protection, which means that you'll have to pay them at least $7.25 per hour and 150 percent of their base salary for every additional hour that they work in a week. There are some exceptions to this law that may apply to the specific type of business you operate. Depending on the state in which your business is located, your state laws for seasonal workers may deviate from the federal guidelines. In this case, defer to your state laws.

Hiring seasonal employees can be a helpful step to take for your business. Make sure to protect your company by getting acquainted with the federal and state laws that apply to seasonal workers.

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