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Hiring Seasonal Employees: What SMBs Need to Know About Payroll Taxes
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For many small businesses, the busy season means bringing in extra hands to keep operations running smoothly. Whether you run a retail store, restaurant, or service business, hiring seasonal employees can give you the boost you need to meet increased demand. But with those temporary hires come payroll tax obligations that can trip up even the most experienced business owners.Before you onboard your seasonal staff, it’s essential to understand how payroll taxes work and what steps you need to take to stay compliant. Proper planning now can save you headaches and unexpected tax bills down the road.1. Seasonal Workers Are Subject to Payroll TaxesOne common misconception is that seasonal or temporary workers are exempt from payroll taxes because they’re not full-time or permanent. However, that’s not the case. In the eyes of the IRS, seasonal employees are treated the same as regular employees when it comes to payroll taxes. This means you’ll be responsible for withholding and paying:Federal income taxSocial Security and Medicare taxes (FICA)State and local income taxes (where applicable)You’ll also need to report their wages on a W-2 form at year’s end, just like your full-time staff.2. Understand the Difference Between Employees and Independent ContractorsAnother tax consideration is determining whether your seasonal workers are employees or independent contractors. Misclassifying an employee as a contractor can lead to significant tax penalties, so it’s important to get this right from the start.Employees: You control how, when, and where they work. You’re responsible for withholding payroll taxes.Independent Contractors: They control how they complete the work and typically provide their own tools or equipment. You’re not required to withhold taxes, but you do need to issue a 1099-NEC form if you pay them $600 or more during the year.If you’re unsure whether a worker should be classified as an employee or contractor, it’s best to err on the side of caution and treat them as employees—or consult a labor attorney to review your situation.3. Seasonal Employee Wages May Affect Your Unemployment TaxesIn many states, the wages you pay seasonal workers are subject to state unemployment taxes (SUTA). However, some states have exemptions or reduced rates for businesses that hire temporary employees, particularly for short periods during peak seasons.Check with your state’s tax authority to see if there are special rules regarding unemployment taxes for seasonal workers. Failing to account for these taxes could result in penalties or an increase in your overall tax rate.4. Affordable Care Act (ACA) Implications for Seasonal Employees
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Tax and Financial Insights
by NR CPAs & Business Advisors
2026 IRS Mileage Rates: Key Updates and Insights
The IRS has rolled out the inflation-adjusted mileage rates for 2026, offering taxpayers an efficient way to claim deductions for vehicle-related expenses incurred for business, charity, medical, or moving purposes. These adjustments reflect the continued economic shifts impacting car operation costs.
Effective January 1, 2026, the new standard mileage rates are established as follows:
- Business Travel: Increased to 72.5 cents per mile, inclusive of a 35-cent-per-mile depreciation allocation. This marks a rise from the 70 cents per mile rate set for 2025
- Medical/Moving Purposes: Reduced slightly to 20.5 cents per mile, down from 21 cents in the previous year, reflecting the variable cost considerations.
- Charitable Contributions: Consistent at 14 cents per mile, a fixed rate unchanged for over a quarter-century.
As is typical, the business mileage rate considers the integral fixed and variable costs of automobile operation. Meanwhile, the medical and moving rates remain contingent on variable expenses as determined by the IRS study.
It is critical to note that the One Big Beautiful Bill Act (OBBBA) held firm on disallowing moving expense deductions except for specific cases within the Armed Forces and intelligence community, marking a substantial shift since 2017.
When engaging in charitable work, taxpayers might opt for a direct expense deduction over the per-mile method, covering gas and oil costs. However, comprehensive upkeep and insurance costs are non-deductible expenses.
Business Vehicle Use Considerations: Taxpayers can alternatively compute vehicle expenses using actual costs, which might benefit from shifting depreciation rules, particularly through bonuses and first-year advantages. Keep in mind, however, reverting from actual cost calculations to standard rates in subsequent years is restricted, particularly per vehicle protocol and when exceeding four vehicles in concurrent use.
Additionally, parking, tolls, and property taxes attributable to business can be deducted independently of the general rate, an often-overlooked advantage by many business owners.
Tax Strategies for Employers and Employees: Reimbursements based on the standard mileage framework, providing the right documentation is in place, remain tax-free for employees. Meanwhile, the elimination and continued prohibition of unreimbursed employee deductions continue, with particular exceptions offered to qualified personnel across specific occupations.
Opportunities for Self-employed Individuals: Entrepreneurs remain eligible for deductions on business-related vehicle use via Schedule C, with potential to account for business-use interest on auto loans.
Heavy SUVs and Deduction Advantages: Heavier vehicles exceeding 6,000 pounds but under 14,000 pounds open opportunities for substantial tax deductions through Section 179 and bonus depreciation avenues. The lifecycle of such a vehicle bears implications on recapturing initially claimed deductions, urging cautious tax planning.
For professional guidance on optimizing your vehicle-related tax deductions and understanding their implications on tax strategies, contact our office in Coral Gables, Florida, where expert advice and strategic insights are just a call away.
Educator's Deduction Reform: Key Changes Under OBBBA
The One Big Beautiful Bill Act (OBBBA) introduces significant enhancements for educators' tax deductions starting in 2026, offering both strategic opportunities and planning considerations for educators who qualify. With the reinstated itemized deduction for qualified unreimbursed expenses, educators have a broader spectrum of financial relief. This is complemented by the retention of the $350 above-the-line deduction, allowing educators to maximize their tax benefits by selectively allocating expenses between these avenues.
Understanding the nuances of these changes is crucial for educators and financial advisors alike. The dual-option deduction strategy can potentially enhance tax efficiency, thereby aligning with broader financial planning goals.
At NR CPAs & Business Advisors, based in Coral Gables, Florida, our expertise in tax preparation and planning provides invaluable support to educators navigating these changes. Our comprehensive approach, combined with personalized advice from our experienced team, ensures compliance and optimization in line with the latest tax legislations.
Given these updates, it is imperative to engage with seasoned professionals to fully leverage your deduction strategies. Contact us today to streamline your tax planning under OBBBA's new guidelines and maximize your deductions for upcoming tax years.
