Important Facts and Issues About Employee Tips
It is essential to note that many employees in service industries receive tips. For that matter, it is vital that employers should have a report of this for tax reasons. If you read more, you will realize that tips are the difference between poverty and financial comfort. This means that tip income is also important to employers. 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. Click here for more on this website about some of the legal issues with employee tips.
First of all, you required by the law 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. One of the rules is that employees are required to report all their cash tips to the employer if their monthly cash tip is more than twenty dollars. You should also note that there is no exception as all the service employees are supposed to submit these reports. But it will be important to organize with all your employees so that they can all report the tips.
Apart from that, the employer is also required to collect employees’ tip reports. This should include all the tips collected monthly. One thing with employees is that sometimes they can fail to submit the report and you must follow up. The good thing with this is that you will be able to get accurate reports for tax reasons.
Besides, the minimum law requirement also expect the employers to ask for more frequent report than that. The reason being that employers need to update their tip report daily. By doing this they will be able to get exact figures for tax reasons.
The next thing is that employers are required to withhold the relevant taxes and make reports to the IRS. This process is tedious and challenging and you can easily expedite it using an online paystub generator as opposed to the manual process. The other thing that you should know is that employers are also required to withhold the relevant income and tip income and FICA taxes on tip income 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. Remember that all these rules and more are supposed to be followed so that you don’t find yourself on the wrong side of the law.