Now that fall is in full swing, many small businesses are dealing with wrapping up the final details of their seasonal summer labor. While accounting for summer employees in general isn't difficult, it can leave employers scratching their heads when it comes to getting information right on the books.
If you're looking to account for temporary employees you hired over the summer, you may be looking for more information on managing their tax reporting or additional benefits. For example, a retailer might hire some college students to beef up your summer and holiday staffing and expect these seasonal employees to become part of the staff long term. Alternatively, if an employee goes on maternity leave, you might bring in a temporary employee to perform the job until she returns. You do not expect a temporary employee to become a long-term member of your staff.
Hiring temporary and seasonal employees makes accounting and HR simpler in some ways, but you still need to follow IRS rules regarding these employees. You also need to make sure that you’re following the rules regarding whether or not to insure them. If you’re uncomfortable wading through the rules on your own, an accounting services provider can assist you.
Withholding Taxes for Seasonal and Temporary Employees
Both seasonal and temporary employees are subject to the same withholding requirements as part-time and full-time employees. Seasonals and temps should fill out Form W-4 to calculate their income tax withholding. You’ll also need to withhold their share of Social Security and Medicare and pay your share as well. If you hire non-resident employees, then withholding rules might differ. IRS Publication 15 can answer specific questions about employees that aren’t U.S. residents.
When you file Form 941 and send in your periodic tax payments, you’ll need to account for your seasonals and temps within that total. You should file Form 941 every quarter unless you pay no wages during a particular quarter.
Health Insurance Implications
Under the Affordable Care Act, businesses must provide health insurance to employees if they employ 50 or more full-time workers. New IRS regulations issued in early 2014 have delayed the requirement for businesses with between 50 and 99 employees until 2016. Businesses with 100 or more employees must offer insurance to 70 percent of employees and their dependents by 2015.
Seasonal and temporary employees that work fewer than six months each year are not considered full-time employees, so you’re not required to offer insurance to them. They also do not count toward your full-time employee roster, even though they might work 30 hours per week or more.
Alternatives to Hiring Temporary Employees
To simplify your accounting responsibilities, consider using a staffing agency as a source of seasonal or temporary employees. You pay a fee to the staffing agency, and the staffing agency, acting as the employer, handles all accounting services and health insurance issues.
If you manage a large staff of varied employment types, consider using an outsourced accounting or bookkeeping service provider to help ensure that you're keeping the books according to current regulations. The last thing you want is to jeopardize your accounting or incur an IRS audit because you didn't account for part-time college students correctly.
In the end, seasonal and temporary employees are simple to manage in terms of taxes. Don’t worry about health insurance, and follow the same withholding procedures that you do for part-time employees.
Looking for an outsourced accounting service provider? We can help take responsibility to keeping your books in order and your employees tracked appropriately. Request a consultation today!