| Understanding the complicated world of taxes is | | | | the tips for every sale made in their establishment |
| difficult enough for a regular paycheck. Adding tips into | | | | each evening. This way, they can remit the proper |
| the mix just makes everything more confusing. Failing | | | | amount to the government. |
| to properly report the full amount of tips you are given | | | | If employees do not report all of their tips to their boss, |
| can get you into a lot of trouble with the IRS. However | | | | the employer can be held liable for "the employer's |
| knowing what as an employee you need to report or | | | | share of the social security and Medicare taxes on the |
| what as the business owner you are responsible for | | | | unreported tips." It is your job, as employer to withhold |
| can sometimes be a fine line. Here are some tips and | | | | and pay taxes with the information you do have from |
| tricks for knowing how to report your tips on your | | | | your employee. If you have more than ten staff |
| taxes. | | | | members working on a typical day than you fall into |
| "Tips" are defined by the federal government as "a gift | | | | the category of a "large food or beverage |
| or a sum of money tendered for a service performed | | | | establishment" and you are required to allocate or |
| or anticipated." Generally if an employee makes over | | | | distribute tips to your employees if the amount of tips |
| twenty dollars in tips a month, they must report them. | | | | reported is less than eight percent of gross sales. If the |
| After they finish working for the night, a waiter must | | | | amount of tips is larger than eight percent, you are not |
| record how many tips they made for their employer | | | | required to allocate, but you must still file the |
| so that the proper tax amount can be withheld from | | | | "Employer's Annual Information Return of Tip Income |
| their next paycheck. Social Security Taxes "on the | | | | and Allocated Tips" form. Taxes should still be withheld |
| gross amount of tips and wages for all employees" is | | | | and paid on allocated or non-allocated tips. |
| paid by their employer. Employers should keep track of | | | | |