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How to Pay Seasonal Employees (and the IRS)

  • 9 December 2014
  • Author: Cari Holbrook
  • Number of views: 2847
How to Pay Seasonal Employees (and the IRS)

It’s that wonderful time of year when many family-owned businesses add temporary staff. And, it seems, this year more than ever. According to global consultancy Challenger, Gray & Christmas, 2014 holiday hiring was off to a great start with the most nationwide October job gains ever recorded. With such a surge, it may be tempting to cut a few corners when it comes to hiring seasonal staff. But, make no mistake, the IRS is watching. Ask yourself the following questions in order to stay out of trouble:

1.     Am I classifying temporary workers correctly? Do you know the difference between an employee and an independent contractor? If you don’t, you could be a part of a growing problem in small business: misclassification of employees. In Texas, misclassifying an employee may be considered payroll fraud, resulting in possible heavy fines and criminal charges. Take a look at how the IRS defines these roles before proceeding.

2.     Am I paying the correct taxes for temporary employees? Once you’ve determined which seasonal workers are, in fact, employees, there’s the matter of employment taxes to consider. The IRS offers a Voluntary Classification Settlement Program (VCSP), which allows taxpayers to reclassify workers as employees for future employment tax purposes and to qualify for partial relief from past federal employment taxes. Contact us to find out if you may be eligible. 

3.     Am I adequately protecting my business from fraud? Taxes aren’t the only way to lose money when hiring seasonal staff. Association of Certified Fraud Examiners (ACFE) research indicates that fraud takes an estimated 20 percent uptick during the holiday season. Don’t cut corners when it comes to hiring and operating procedures when things get hectic. Due diligence is always a good idea.   

This year, save money in the long run by making sure you’re hiring the best seasonal workers available, classifying them appropriately and paying the correct taxes. Not sure which path is the correct one? Feel free to contact us with questions. When it comes to payroll taxes in particular, shortcuts often lead down a dangerous (and costly) path.

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