Summer Hiring? Here’s How to Handle Seasonal Workers, Interns, and Payroll Compliance Without the Headache
Author name
Hiring for the summer?
That’s exciting—until the IRS gets involved.
While onboarding interns or part-time help sounds simple enough, summer hiring is one of the most common ways small business owners get tripped up on payroll, compliance, and classification.
And yes, even a single misstep—like putting a W-2 employee on a 1099 “just for the summer”—can cost you big.
Let’s Clear This Up: Not Everyone’s a Contractor
You’re not alone if you’ve ever said:
“We’re just paying them a flat rate—it’s easier that way.”
“They’re only here for 10 weeks.”
“They’re a student; it’s not really a job-job.”
Here’s the hard truth:
If you control when, where, and how someone works—you’re probably supposed to issue a W-2.
The IRS doesn’t care if it’s part-time, seasonal, freelance, or “just a favor.” If they look like an employee, they are one—and they want to see payroll taxes, not contractor payments.
Need the official word? See IRS guidelines on worker classification
Interns? Yes, They Usually Count Too.
Many businesses think unpaid internships are a gray area. But unless it’s tied to a formal educational program with no expectation of compensation, the Department of Labor may classify your intern as an employee.
That means:
- Minimum wage laws apply
- You may owe payroll taxes
- Workers’ comp coverage could be required
Rule of thumb: If they’re contributing to your business, they probably need to be on payroll.
Don’t Miss Out on This: The Work Opportunity Tax Credit (WOTC)
Here’s some good news:
If you’re hiring people from certain target groups—like veterans, long-term unemployed, or summer youth employees—you might qualify for the WOTC, which can reduce your federal income tax liability by up to $2,400 per qualifying hire.
But:
- You have to apply before hiring
- The paperwork needs to be filed with your state agency
- Most businesses never realize they’re eligible
More info? Explore the WOTC program here
Other Things to Nail Down (Before Your First Payday)
- Set up correct federal and state withholding
- Ensure you have an active payroll system (manual payments often miss required filings)
- Collect and retain Form I-9s and W-4s
- Check if local labor laws require sick leave or additional reporting for part-time workers
- Know if you need to pay overtime—even if it’s “just for the summer”
The Bottom Line: Don’t Wing Payroll
We get it—your focus is on growing your business, keeping clients happy, and getting help in the door. But ignoring payroll compliance (even for “just a few weeks”) can lead to:
- Penalties for misclassification
- Missed tax credits
- State audits
- Unhappy former employees filing claims you didn’t see coming
Need a Hand Sorting It Out? Call Us Before You Hire
We’ve helped hundreds of small business owners set up summer payroll the right way—without overcomplicating things or drowning in red tape.
If you’re planning to bring on part-time, seasonal, or intern help in the next few weeks, let’s talk.
We’ll help you stay compliant, minimize tax risk, and maybe even find some credits you didn’t know existed.
Contact our office before you run that first paycheck—we’ll help you do it right from the start.
If you could not complete your 2024 tax return by April 15, 2025, and are now on extension, that extension expires on October 15, 2025. Failure to file before the extension period runs out can subject you to late-filing penalties. There are no additional extensions (except in designated disaster areas), so if you still do not or will not have all the information needed to complete your return by the extended due date, please call this office so that we can explore your options for meeting your October 15 filing deadline. If you are waiting for a K-1 from a partnership, S-corporation, or fiduciary (trust) return, the extended deadline for those returns is September 15 (September 30 for fiduciary returns). So, you should probably make inquiries if you have not yet received that information. Late-filed individual federal returns are subject to a penalty of 5% of the tax due for each month, or part of a month, for which a return is not filed, up to a maximum of 25% of the tax due. If you are required to file a state return and do not do so, the state will also charge a late-file penalty. The filing extension deadline for individual returns is also October 15 for most states. In addition, interest continues to accrue on any balance due, currently at the rate of just over .5% per month. If this office is waiting for some missing information to complete your return, we will need that information at least a week before the October 15 due date. Please call this office immediately if you anticipate complications related to providing the needed information, so that a course of action may be determined to avoid the potential penalties. Additional October 15, 2025, Deadlines – In addition to being the final deadline to timely file 2024 individual returns on extension, October 15 is also the deadline for the following actions: - FBAR Filings - Taxpayers with foreign financial accounts, the aggregate value of which exceeded $10,000 at any time during 2024, must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). The original due date for the 2024 report was April 15, 2025, but individuals have been granted an automatic extension to file until October 15, 2025. SEP-IRAs – October 15, 2025, is the deadline for a self-employed individual to set up and contribute to a SEP-IRA for 2024. The deadline for contributions to traditional and Roth IRAs for 2024 was April 15, 2025. Special Note – Disaster Victims – If you reside in a Presidentially declared disaster area, the IRS provides additional time to file various returns, make payments and contribute to IRAs. Check this website for disaster-related filing and paying postponements. Please call this office for extended due dates of other types of filings and payments and for extended filing dates in disaster areas. Please don’t procrastinate until the last week before the due date to file your extended returns. Final note: if for whatever reason you miss the October 15 deadline, you should still file your return as soon thereafter as possible. If you need a professional to assist you with your taxes or need tax information, get started with Steve Brewer CPA & Company.
After September 30, 2025, the IRS will NOT accept checks, money orders, cashier checks, etc. for payment of taxes, penalties, fines and interest. You will only be able to pay by ACH or with credit card. This does not affect the third quarter estimated individual tax payments which are due on September 15, 2025. It will affect every business and individual who will be making any form of payment thereafter. The fourth quarter estimate payment is due on January 15, 2025. You will not be able to pay this by check. It must be in some form of an electronic payment. You could go ahead now and make your fourth quarter estimate payment by September 15 along with the third quarter payment. You will need to designate the payment as fourth quarter and enclose any payment voucher you have. The estimate vouchers we give you do have instructions on how to pay online for both federal and state. What does this mean if you owe on your tax return? 1. You will have to arrange payment using the instructions that are included on your payment voucher. 2. If you have set up an individual account with the IRS, you may make the payment via that account. 3. Finally, we can arrange through our tax software to have the amount due deducted from your bank account. We must do this at the time of filing the return. Once the return is filed, we cannot refile it. We are going to offer another option. An individual estimated tax payment service. In this service we will arrange payment of your estimated payment each time one comes due. We will contact you about 2 weeks prior to the due date to confirm your information. We will then arrange for the estimate payment for both the federal and state. We will be offering this service for each quarter. For most of you it will be arranging payment of the estimates which we give you when you pick up your tax return. If you are one of our clients who we calculate up-to-date payments, you may add on this service. The cost of this service is $200 per year. If you are uncomfortable working with a computer, do not have time each quarter or just want to get it done, then this service is for you. If you are interested, please call Christina at the office to arrange a call to discuss this.
Many taxpayers don’t feel the need to keep home improvement records, thinking the potential gain when they sell their home will never exceed the amount of the tax code’s exclusion for home gains explained as follows. Under the current version of the tax code, you are allowed to exclude from your income up to $250,000 ($500,000 for married couples) of gain from the sale of your primary residence if you owned and lived in it for at least 2 years (24 months) of the 5 years before the sale. You also cannot have previously taken a home-sale exclusion within the 2 years immediately preceding the sale. There is no limit on the number of times you can use the exclusion if you meet these time requirements; however, extenuating circumstances can reduce the amount of the exclusion. The home-sale gain exclusion only applies to your main home, not to a second home or a rental property. As noted above, you must have used and owned the home for 2 out of the 5 years immediately preceding the sale. The years don’t have to be consecutive or the closest to the sale date. Vacations, short absences, and short rental periods do not reduce the use period. If you are married, to qualify for the $500,000 exclusion, both you and your spouse must have used the home for 2 out of the 5 years prior to the sale, but only one of you needs to meet the ownership requirement. When only one spouse in a married couple qualifies, the maximum exclusion is limited to $250,000 instead of $500,000. If you don’t meet the ownership and use requirements, there are some situations in which a prorated exclusion amount may be possible. An example of this situation would be if you were required to sell the home because of extenuating circumstances, such as a job-related move, a health crisis or other unforeseen events. Another rule extends the 5-year period to account for the deployment of military members and certain other government employees. Please call this office if you have not met the 2 out of 5 rule to see if you qualify for a reduced exclusion. But what if your home sale gain is more than the home sale exclusion? Then it is in your best interests to have kept home improvement records, since the costs of improvements can be added to your purchase price of the home to be used in determining the gain. So keeping the receipts for the improvements, even if only in a folder or a shoe box, may be useful in the future when you sell your home. Here are some situations when having home improvement records could save taxes: The home is owned for a long period of time, and the combination of appreciation in value due to inflation and improvements exceeds the exclusion amount. The home is converted to a rental property, and the cost and improvements of the home are needed to establish the depreciable basis of the property. The home is converted to a second residence, and the exclusion might not apply to the sale. You suffer a casualty loss and retain the home after making repairs. The home is sold before meeting the 2-year use and ownership requirements. The home only qualifies for a reduced exclusion because the home is sold before meeting the 2-year use and ownership requirements. One spouse retains the home after a divorce and is only entitled to a $250,000 exclusion instead of the $500,000 exclusion available to married couples. There are future tax law changes that could affect the exclusion amounts. Everyone hates to keep records but consider the consequences if you have a gain and a portion of it cannot be excluded. You will be hit with capital gains (CG), and there is a good chance the CG tax rate will be higher than normal simply because the gain pushed you into a higher CG tax bracket. Before deciding not to keep records, carefully consider the potential of having a gain more than the exclusion amount. Home improvements include just about anything that will increase the value of the home, from big ticket items like remodeling a kitchen, adding another room or a swimming pool, and landscaping to smaller items like ceiling fans. But there are some home improvements that cannot be included in the cost of home improvements, or may be only partly included. Examples are items which qualify for tax credits such as home solar, home energy efficient improvements or those that qualify for a tax deduction such as handicap improvements. In addition, the costs of general maintenance or repairs, such as fixing leaks, painting (interior or exterior), and replacing broken hardware do not count as improvements. If you have questions related to the home gain exclusion or questions about how keeping home improvement records might directly affect you, please give this office a call.