Considerations for Payroll Taxes When Hiring Summer Interns

Payroll Taxes Apply to Paid Interns

As small business owners eye summer interns to manage increased workloads, it's crucial to remember payroll tax responsibilities. If you are planning to pay your intern – whether hourly or via stipend – they must be treated just like any employee. You will need to withhold Social Security, Medicare, and applicable federal or state income taxes from their pay. Additionally, as their employer, you must match these Social Security and Medicare contributions and report and pay taxes accordingly.

Tax Filing and Reporting Requirements

When hiring paid interns, don't forget that a W-2 form is required. Be sure to comply with state income tax rules, and consider additional federal requirements if you have international students or non-U.S. citizens. It's advisable to familiarize yourself with specific state laws and seek guidance if you are uncertain about any processes involved.

Unpaid Interns and DOL Criteria

If you plan to have unpaid interns this summer, note that they are exempt from payroll tax obligations. However, it’s crucial to comply with the Department of Labor’s Primary Beneficiary Test. Remember, unpaid interns should not substitute for paid employees. Non-compliance here could lead to penalties that most businesses would prefer to avoid.

Independent Contractors

Interns that qualify as independent contractors are not subject to payroll taxes. If this is your preferred route, ensure they meet the criteria for filing a 1099-NEC. Misclassification risks exist, so define the intern’s role clearly before hiring to prevent potential penalties. While summer interns can be an integral part of your business’s operations, it’s essential to manage tax and legal obligations diligently. A thorough review of your intern hiring process or a consultation with a payroll expert could save you from costly missteps. By doing so, you can fully enjoy the benefits interns bring while maintaining compliance.