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Summer Hiring? Here’s How to Handle Seasonal Workers, Interns, and Payroll Compliance Without the Headache

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.

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Disclaimer
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, Tobi Li Marshall CPA, APC would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.