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Lighten the tax burden for seasonal employees

by on
in Hiring,Human Resources

Is your company hiring interns or other inexpensive labor this summer? Here’s how to attract part-timers without increasing costs.

Strategy: Offer reduced federal income tax withholding. By using the “part-year withholding method,” workers receive more money when they usually want it the most—during the summer—instead of waiting for a tax refund next year.

To qualify, an employee must make a request and indicate he or she expects to work no more than 245 days during the year. Then your company needs to follow these six steps:

Step 1. Add the employee’s wages for the pay period to the amount of wages paid to him or her during the current seasonal employment period.

Step 2. Add the number of payroll periods for which wages were paid to the employee to the number of payroll periods between the last day of work from prior employment and the first day of work at your company.

Step 3. Divide the wages from Step 1 by the total payroll periods from Step 2.

Step 4. Figure the tax on the amount of average wages from Step 3.

Step 5. Multiply the total payroll periods from Step 2 by the tax from Step 4. This is the total amount to be withheld to date.

Step 6. Figure the amount of tax already withheld and subtract that amount from the Step 5 result. The excess is the amount you must withhold for the current pay period.

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