Do you own a seasonal business? The taxation of these businesses is a bit unique. Here’s what you should know.

What is considered a seasonal business?

A seasonal business, according to the IRS, is a business which is dependent on income earned during peak periods of the year. As such, a summer beach rental, ski resort or lawn care service are all considered seasonal businesses.

Who is considered a seasonal worker?

The IRS defines a seasonal worker as anyone who works on a seasonal basis, i.e. for six months or less.

How are seasonal businesses taxed?

These businesses have to pay taxes like any other organization. Here are the main considerations.

Payroll taxes- Seasonal hires are subject to federal and state income taxes just like any other employee. You must also withhold FICA taxes (Social Security and Medicare) from seasonal workers unless they are independent contractors.

Employer duties

It’s wise to have every seasonal worker fill out an IRS W-4 form which is used to determine the amount of tax that will be withheld from each paycheck.

Your independent contractors will need to fill out IRS Form W-9 which is used to record information about a contractor so that their earnings can be reported at year end.

You will also have to file form 941 to report your seasonal payroll. You are only required to submit during the quarter(s) which those employees work. To let the IRS know that you will not be filing a return for one or more quarters during the year, just check the “seasonal employer” box for every quarter you do file.

Other tax considerations

As a seasonal business owner, you may need to pay self-employment taxes (the threshold for reporting income is $400 net profit). You will need to attach Schedule SE to your Form 1040 in this situation. Remember to keep all your receipts, payment information and quarterly tax payments!

After the year we’ve all endured, here is wishing you a very successful season!

Questions? Contact us.