Tax Considerations for Seasonal Workers in the Fall

Tax Considerations for Seasonal Workers in the Fall

As the fall season approaches, many businesses are gearing up to hire part-time or full-time seasonal workers. Whether it’s for the upcoming holiday season, sports events, or harvest and fishing seasons, seasonal workers play a vital role in meeting the increased demand. However, it’s important for both employers and employees to understand the tax implications that come with hiring and working as a seasonal worker. In this article, we will explore the tax considerations that both employers and employees should be aware of during the fall season.

Understanding Seasonal Workers and Tax Withholding

The Internal Revenue Service (IRS) defines seasonal workers as employees who perform labor or services on a seasonal basis, typically for six months or less. This includes individuals working in retail exclusively during holiday seasons, sports events, or specific harvest and fishing periods.

Just like other employees, part-time and seasonal workers are subject to the same tax withholding rules. When starting a new job, all taxpayers, including seasonal workers, are required to fill out a Form W-4. This form helps employers determine the appropriate amount of tax to withhold from each paycheck. However, it’s important to note that Form W-4 doesn’t distinguish between part-year jobs and full-year jobs, which can lead to potential under- or over-withholding of taxes.

Changes to Withholding under Tax Reform

It’s crucial for both employers and employees to be aware of the changes in tax law that may affect their paychecks and tax returns. The Tax Cuts and Jobs Act, which went into effect in 2018, made significant changes to the tax law, including increasing the standard deduction, eliminating personal exemptions, and changing the tax rates and brackets.

For part-time and seasonal employees, any changes made to their withholding amount have a more significant impact on their paycheck compared to employees who work year-round. Therefore, it’s important for seasonal workers to perform a “paycheck check-up” to ensure that their tax withholding is accurate.

Using the Withholding Calculator

The IRS provides a helpful tool called the Withholding Calculator, which can assist taxpayers, including part-year employees, in estimating their income, credits, adjustments, and deductions more accurately. This tool takes into account the dates of employment for part-year workers, ensuring that the periodic tax withholding amount aligns with their shorter employment period.

To use the Withholding Calculator, taxpayers should have their most recent completed tax return and their most recent pay stub available. The calculator results depend on the accuracy of the information entered, so it’s important to provide the correct details. If a taxpayer’s personal circumstances change during the year, they should revisit the calculator to determine if any adjustments to their withholding need to be made.

Adjusting Your Withholding

If the Withholding Calculator suggests a change in the withholding amount, the employee should complete a new Form W-4 and submit it to their employer as soon as possible. It’s crucial to update the withholding allowances promptly, especially if there are changes in personal circumstances that may affect the number of allowances claimed.

Tax Considerations for Students with Summer Jobs

Many students take on part-time jobs during the summer to earn extra income. It’s important for both students and their parents to understand the tax implications of these summer jobs. All income earned by students, including tips received as waiters or camp counselors, is subject to federal income tax.

If a student engages in self-employment activities, such as babysitting or lawn mowing, the income earned from these odd jobs is also taxable. Students with net earnings of $400 or more from self-employment are required to pay self-employment tax, which covers benefits under the Social Security system. It’s essential for students to keep track of their self-employment income and report it accurately on their tax returns.

Special Rules for Newspaper Carriers and Distributors

In general, newspaper carriers or distributors under the age of 18 are not subject to self-employment tax. However, there are specific rules that apply to services performed in the newspaper industry. If a child is considered a direct seller, meaning they are in the business of delivering newspapers and their pay is based on sales rather than hours worked, they are treated as self-employed for federal tax purposes. However, a written contract stating that the child will not be treated as an employee is required.

Seeking Out a Professional

As a seasonal or part-time worker, you may not be required to file a federal or state tax return if your wages are below the standard deduction. However, if you work multiple jobs or have complex tax situations, it’s advisable to seek out a professional. Seasonal workers have unique tax considerations, and consulting a tax professional can ensure that you meet your tax obligations accurately.

In conclusion, seasonal workers play a crucial role in various industries during the fall season. It’s essential for both employers and employees to understand the tax implications and consider the changes made to the tax law. By using tools like the Withholding Calculator and seeking professional help when needed, seasonal workers can navigate their tax obligations effectively, ensuring compliance and avoiding any potential penalties or issues with their tax returns.