Things that You Should Know About Issues With Employee Tips
One thing that you should know about is that majority of employees in the service industry receive tips. Because of that employers need to have a report of this for tax purposes. These tips bring the difference between poverty and financial comfort. Because of that tip income will also be relevant 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. 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. 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. Besides, you should know that these reports are supposed to be made by all the service employees and there is no exception. 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. Remember that it is possible that some of the employees can fail to submit the tip report and you have to make sure that it is done. 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. This is important in making sure that they have accurate figures for tax reasons and accuracy.
This should be followed by withholding the pertinent 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.