Summer is busy for many companies, especially those that hire part-time or full-time workers. By definition, seasonal workers are employees who provide labor or services temporarily (i.e., for less than six months). Typical seasonal employees include retail workers who work just during holidays, sporting events, harvest season, and commercial fishing season. Tax withholding regulations apply the same to part-time and seasonal employees as to full-time employees.
Each taxpayer must complete a W-4 form when starting a new job. Employers use this form to calculate how much tax they should withhold from their paycheck.
Managing accounting, bookkeeping, and tax functions can divert your attention and time from other aspects of your business. To understand tax and accounting concepts in an easy-to-understand manner, seek the guidance of a Phoenix, Arizona CPA.
The effect of tax reform on withholding
In 2018, the Tax Cuts and Jobs Act was signed into law, increasing the standard deduction, removing personal exemptions, boosting the child tax credit, and removing or limiting certain deductions. Many taxpayers, including those returning to work, working part-time, or doing seasonal jobs, may not be aware of the new tax law’s effects.
It is more difficult for part-time employees to adjust their withholding amounts than year-round employees. Thus, this is the perfect time for taxpayers who work part-time to conduct a “paycheck check-up” using the IRS Withholding Calculator.
You can use this tool to estimate your income, deductions, credits, and adjustments on the IRS website. In addition, it determines whether a taxpayer’s tax withholding is appropriate given their financial situation.
How to use the Withholding Calculator?
- First, the calculator adjusts for the shorter employment period of a part-time employee rather than assuming the employee’s weekly tax withholding is applied to a full year of work.
- The calculator then generates part-time employee recommendations based on this information. In case a taxpayer has multiple part-time jobs, the Withholding Calculator can also take that into account.
Using the Withholding Calculator, taxpayers must have a prior-year tax return and their most recent pay stub.
Whether the numbers entered in the calculator are correct determines the outcome. A taxpayer may need to adjust their withholding if their circumstances change during the year. If you work a limited amount during the year, you’ll need to do an annual “paycheck check-up” early on to ensure your tax withholding is correct.
