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Temporary and Seasonal Workers Taxes

Temporary and Seasonal Workers Taxes
Ines Zemelman, EA
13 October 2021

If your business relies on revenue during certain periods of the year, you may have a seasonal business. Seasonal jobs are often obtained by students and other taxpayers as a way of earning additional spending money or to save for the future. In accordance with IRS regulations, seasonal workers are considered to be those who are employed for fewer than six months.

It is not uncommon for businesses to temporarily hire seasonal workers, part-time workers, or independent contractors. Sports events, holidays, and fishing and harvest seasons are just a few examples of when some businesses need seasonal help such as seasonal workers or seasonal employees. The tax treatment of part-time and seasonal employees payments often causes confusion, regardless of whether you are getting paid or paying someone else.

Seasonal Workers Taxes

To answer the most frequently asked question: Do seasonal workers pay tax? In a word, yes. Some people are unaware that they are required to file a tax return with the Internal Revenue Service if they receive income from a part-time or temporary job.

The same rules apply to tax withholding for part-time and seasonal employees as they do for other employees.

If you have a seasonal business, you may find payroll taxes to be different on your tax return. During peak business seasons, hiring seasonal workers is a common business practice. The tax on income generated by seasonal employees is the same as it is for employees of other types. When an employee is hired as an independent contractor, FICA taxes (Social Security and Medicare) are withheld by the employer. 

Tip Income earned by seasonal employees is also taxable. Seasonal workers should be maintaining their records for tip income during this period.

Seasonal Workers Tax Reporting

Whenever a taxpayer starts a new job, they are recommended to fill out a Form W-4. W-4 forms are filled out by employees as part of the income tax withholding process. They give employers information about their filing status, dependents, anticipated tax credits, and deductions. For many employees, Form W-4 worksheets don't distinguish between part-year jobs and full-year jobs when they fill out this form.

You can also ask your team members to complete Form W-9 if they prefer to work as independent contractors. Independent contractors taxpayers and freelancers in the U.S. provide W-9 forms to the IRS to estimate the amount of taxes they will owe. Businesses are also relieved of the burden of withholding and paying taxes on behalf of these contractors when they use this form.

Seasonal employers are required to collect and report their seasonal payroll using Form 941 along with W-9s or W-4s. Forms must be submitted only during the quarter(s) in which the employee works.

To report your employees' earnings and withholdings, employers must submit the quarterly Form 941 to the IRS. For quarters where you haven't paid wages or had no tax liability, seasonal employers are not required to file a Form 941. Check the "Seasonal employer" box on Form 941, line 18. This alerts the IRS that you won't be filing a tax return for one or more quarters during the year. 

The IRS must receive the request to file Form 944 during the first calendar quarter of the tax year if you're due to file Form 941 but expect your employment taxes for the year to be $1,000 or less. In order to file Form 944 instead of the regular Form 941, you must receive a written notice from the IRS.

Can Seasonal Workers Claim A Tax Refund?

You may discover that you have paid too much tax after you have finished your seasonal work. An overpaid tax may result in a taxpayer receiving a refund when the IRS can prove that the tax was paid in error. It is possible to overpay taxes in many different situations, including over withholding and overpayments of estimated taxes. The IRS Tax Withholding Estimator is advised during tax season to determine withholding amounts accurately.

Ines Zemelman, EA
Founder of TFX