Embracing a New Season with Interns
As a small business owner or manager, the summer months present a great opportunity to bring in fresh talent in the form of summer interns. They can infuse your business with innovative ideas, eagerness to learn, and essential seasonal help. However, while interns can be an excellent addition to your team, it's crucial to understand and manage payroll tax responsibilities effectively. Let's explore the key points you need to know. Payroll Taxes Apply to Paid Interns
If your summer interns are paid, whether hourly or through a stipend, you must treat them like any other employee for payroll taxes. This means withholding Social Security, Medicare, and applicable federal/state income taxes from their wages. Additionally, employers are expected to match Social Security and Medicare contributions and handle the associated reporting and payments. Understanding Your Tax Filing and Reporting Requirements
For paid interns, remember that issuing a W-2 form is non-negotiable. State income tax rules might also come into play, especially if you're employing international students or non-U.S. citizens. Checking specific state laws and acquiring guidance from a knowledgeable source can prevent costly errors down the line. Unpaid Interns and DOL Criteria
An unpaid internship may seem like an economical choice, but it requires careful management. Unpaid interns are exempt from payroll tax obligations, but you must meet the Department of Labor’s Primary Beneficiary Test to ensure compliance. This means unpaid interns should not displace paid employees or provide the company with immediate advantage. Consideration of Independent Contractors
If an intern qualifies as an independent contractor instead of an employee, you won't need to worry about payroll taxes. However, any payment over $600 requires filing a 1099-NEC. Clearly defining each intern's role from the onset helps avoid potential misclassification risks and penalties.
Even with these responsibilities, summer interns can be a wonderful resource for your business. Taking care of legal and tax compliance is an essential aspect of managing this valuable workforce. Proactively check your intern hiring process or consult with a payroll expert to ensure you’re on the right path, allowing you to focus on the benefits interns bring into your team.
