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Discover the key tax benefits of hiring seasonal employees, including potential savings on payroll taxes, credits, and compliance strategies for your business.
Whether you're a retail business preparing for the holiday rush or a hospitality company ramping up for tourist season, seasonal employees are a critical part of your workforce. But beyond helping your business stay flexible and efficient, seasonal hires come with real tax advantages—if you know where to look.
In 2025, with inflation, labor shortages, and increasing overhead costs, business owners need to maximize every available tax break. The IRS provides several incentives that reward employers for hiring part-time or temporary workers, especially those from specific target groups.
Let’s break down what seasonal employment means, the tax benefits you can claim, and how to avoid costly mistakes with the IRS.
A seasonal employee is someone hired on a temporary basis for a specific time of year, usually when business demand spikes. According to the IRS and Department of Labor, these are typically workers employed less than six months during the year, such as:
📌 You can read more on the IRS definition and treatment of seasonal employment in IRS Topic No. 756: Employment Taxes.
One of the most overlooked benefits of hiring certain seasonal workers is the Work Opportunity Tax Credit (WOTC). This federal credit offers up to $9,600 per employee if they belong to a designated target group.
Seasonal hires may qualify if they are:
Even a single qualifying hire can lead to significant federal tax savings.
A resort in California hires 10 summer youth employees from a qualified empowerment zone. They could claim up to $1,200 per youth under WOTC, totaling $12,000 in tax credits.
✅ How to claim: Employers must file IRS Form 8850 within 28 days of hiring the employee. Learn more from the IRS WOTC page.
Seasonal employees hired for short durations may exempt your business from certain health care requirements and payroll tax obligations.
Under the Affordable Care Act (ACA), employers with 50 or more full-time equivalent (FTE) employees must offer health insurance. However, seasonal employees working fewer than 120 days/year do not count toward the 50-employee threshold.
This can keep small-to-mid-sized businesses below the ACA employer mandate cutoff and save thousands in healthcare-related costs.
📌 Reference: See IRS Employer Shared Responsibility Provisions
Hiring seasonal workers on a temporary basis often leads to lower state unemployment insurance (UI) costs—especially if those workers don’t qualify for UI after the season ends. Some states classify certain industries (like agriculture or hospitality) as seasonal exempt, lowering your UI contribution rate.
✅ Pro Tip:
Check if your state allows seasonal designation for your industry. This can dramatically reduce your state UI premiums if seasonal employees are excluded from post-employment claims.
While not directly tied to seasonal employees, expanding your operations seasonally often means investing in:
💡 These assets may qualify for Section 179 expensing or bonus depreciation—even if used only for seasonal operations.
💡 Learn more via IRS Publication 946.
Hiring seasonal employees brings expenses you can deduct to lower your business taxable income, such as:
📌 See IRS Publication 535 for more information on deductible business expenses.
Some business owners misclassify seasonal workers as independent contractors to avoid payroll taxes. But the IRS has cracked down on this practice.
If you control the work, set the hours, and provide tools, they are likely employees—not contractors.
🚨 Misclassification can trigger audits, penalties, and back taxes. Use the IRS 20-factor test or Form SS-8 to clarify worker status.
From a strategic standpoint, hiring seasonal employees helps align labor costs with actual revenue. Instead of carrying full-time payroll year-round, businesses can scale up and down. This can:
In 2025, this agility is especially valuable amid inflation and rising labor costs.
Even with these tax perks, many small businesses make avoidable errors when hiring seasonal workers. Here's how to stay compliant:
Solution: File IRS Form 8850 within 28 days of hiring.
Solution: Use IRS worker classification guidance.
Solution: Maintain clear documentation of seasonal roles and hours for ACA and FTE calculations.
Solution: Track training, equipment, and other startup expenses.
Case Study: Local Boutique in Austin, TX
In 2024, a small retail shop hired six part-time employees from May to August to handle the tourist season. Three were college students (age 17), two were SNAP recipients, and one was a veteran.
2025 Tax Results:
📌 Result: A net $10,000+ in tax benefits—plus smoother operations during peak season.
At Vincere Tax, we help business owners leverage the full tax advantages of seasonal employment—without the compliance headaches. Whether you're in retail, hospitality, agriculture, or events, our CPAs and advisors can help you:
Seasonal workers aren’t just a short-term staffing solution—they’re a long-term tax strategy. With the right planning and support, businesses can use seasonal employment to cut tax bills, stay flexible, and increase profitability in 2025.
💡 Before your next hiring surge, talk to your tax advisor or reach out to Vincere Tax to get ahead of the game.
Only if you choose to offer them. Under ACA rules, seasonal workers under 120 days aren’t counted toward employer mandates.
If they work more than 120 days per year, they may count toward full-time equivalents.
Yes. Even one qualifying worker can generate a credit of $2,400–$9,600.
No. WOTC generally only applies to new hires, not returning employees.
Yes. Bonuses, like wages, are a deductible business expense.
Being audited is comparable to being struck by lightning. You don't want to practice pole vaulting in a thunderstorm just because it's unlikely. Making sure your books are accurate and your taxes are filed on time is one of the best ways to keep your head down during tax season. Check out Vincere's take on tax season!
This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.
For business tax planning articles, our tax resources provides valuable insights into how you can reduce your tax liability now, and in the future.
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