Tips for Small Seasonal Businesses
The busiest time in retail is just around the corner. With Halloween spend doubling over the past ten years and the winter holidays bringing in roughly $600 billion, it is not a bad time to be in seasonal business (National Retail Federation). If you have never operated a business for only few months a year, here are a few things to consider when making your aspirations a reality.
Choosing a Tax Year
A tax year is an accounting period of 12 consecutive months that you must report taxable income, profits, and expense. You may choose between a calendar year or a fiscal tax year. It is important to consider your unique circumstance and your business’s legal structure when choosing a tax year. It is possible to adopt a different tax year down the line, but considering all options will help avoid more paperwork.
The calendar year is the period from January 1 to December 31. If you are the sole proprietor of your small seasonal business, this choice may be for you. As many sole proprietors file their business’s reports under their personal finances, it may also be the most simple option for you. There are provisions that require the use of a calendar year. Be sure to compare your circumstance to those in the Internal Revenue Code or Income Tax Regulations. Many big businesses as corporations operate under a fiscal tax year, a consecutive 12 months that is not from January 1 to December 31. If you think that a calendar tax year may give an unclear or partial view of your business’s finances, you may be an exception that needs to operate under a fiscal year. Allow both your profit and expenses to appear in the same tax year.
Truly seasonal businesses that only operate a few months a year have another choice. A short tax year is only an option for a business that is not in existence an entire tax year (calendar or fiscal). This may be the perfect answer for your Halloween pop-up shop or your Christmas tree operation. (You may also temporarily operate under a short tax year when switching between a calendar and fiscal year.)
Many seasonal businesses bring on temporary help during the peak of the respective season. For purely seasonal businesses, this is the only time you’re hiring staff. It is important to remember that no matter the circumstance, seasonal employees are subject to the same rights and tax withholding rules that apply to all part- and full-time employees. However, you are not required to file a quarterly Form 941 for seasonal employees in quarters where they weren’t paid.
Finding a CPA
As the final months of the year can be very profitable, we highly encourage hiring a Certified Public Accountant (CPA). Getting your business of the ground, running the day-to-day, keeping track of finances, and filing taxes can be overwhelming, but it doesn’t have to. CPAs are a great help to small seasonal businesses and can be a great source of advice for when you have tax-related questions.