Issue link: http://cp.revolio.com/i/142672
tips on tips Tax Tips On Gratuity • he IRS defines tips as payments T clients make solely of their own volition. They don't owe you the money, and they have the right to decide how much they will give. Mandatory tips added onto bills aren't considered tips; the IRS views them as service charges. • f cash tips from clients exceed I $20 a month, they are considered taxable wages for payroll-tax purposes. Noncash tips—for example, a ticket to a concert— aren't considered wages. • eep accurate, daily K records of cash tips. • f you are an employer and your I employees receive taxable tips, you'll have to withhold both income taxes and FICA (social security and Medicare) taxes on the tips. As the employer, you also will have to cover the employer's portion of FICA and FUTA (federal unemployment taxes). According to Business Owner's Toolkit (www.toolkit.com), a website that advises small-business owners on financial issues: "Normally, you withhold income and FICA taxes from the employee's wages. But in the case of tips, you never had the tip amount in your hands, so you can't hold back any of it for taxes. Instead, you'll have to take the withholding from the regular wages." • o keep track of monthly tips, T employees generally use IRS Form 4070 (Employee's Report of Tips to Employer) and Form 4070A (Employee's Daily Record of Tips and Report to Employer). • onthly tip reports should be M submitted by employees by the 10th of the following month; for example, tips received in January should be reported by February 10. • mployees are responsible for E the accuracy of their tip reports. But if they fail to report tips that exceed $20 a quarter, you—the employer—can be held liable for the employer's portion of FICA taxes. • ublication 1244, available P from the IRS (www.irs.gov), describes federal requirements for reporting tips. • hen reporting tips to the IRS, W the employer puts the data on IRS Form W-2 (Wage and Tax Statement), which is filed annually. Each quarter, the employer also will have to file an IRS Form 941 (Employer's Quarterly Federal Tax Return). This is the form used to report wages, tips, and other compensation paid to employees. The form also indicates whether you made tax deposits or withheld income and FICA taxes during the quarter. SPH