Important Facts and Issues About Employee Tips
You find that majority of employees in the service industry receive tips. You should know that it is also important for the employers to have a report of this for tax reasons. Besides, tips are regarded as what creates the difference between poverty and financial comfort. Perhaps this is what makes tip income more relevant to employers too. The challenging part with people who employ people who depend on tips is that they don’t know a lot of obligations concerning those tips. The big question is whether you have to report these tips or not. Here are some of the things that will help you learn more info. on the legal issues with employee tips.
To start with, you should understand that the law requires you to report employee tips. Thus not all, but there are multiple reporting rules in this area that you should be aware of before anything else. The first rule is that employees have to report all of their cash tips to their employers if it exceeds twenty dollars. You should also note that there is no exception as all the service employees are supposed to submit these reports. One important that you will do as an employer is finding a way in which you make all your employees responsible when it comes to reporting tips.
Apart from that, the employer is also required to collect employees’ tip reports. Besides, you should also make sure that the report contains all the tips received monthly. One thing with employees is that sometimes they can fail to submit the report and you must follow up. This way you will be able to get accurate figures for tax reasons.
The other thing is that the employers are also allowed to request more frequent reports than that as a minimum requirement by the law. The law needs the employers to update their tip report daily. By doing this they will be able to get exact figures for tax reasons.
Having done that, employers must withhold the relevant taxes and make a report to the IRS. One thing that you should know is that filling paystubs manually and you can best execute this process using an online paystub generator. You should also know that employers are supposed to withhold the relevant income and tip income as well as FICA taxes as they do with regular earnings.
To sum up, employers must also match the amount paid by the employees in FICA taxes as they do with regular income. The best way of being compliant with the law is by following the tip regulations.
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