One thing that you should know about is that majority of employees in the service industry 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. Perhaps this is what makes tip income more relevant to employers too. If you employ people who depend on tips, you might not know more info. about your reporting obligation about these tips. Now! Do you have to report tips as an employer. 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. Besides, you should know that these reports are supposed to be made by all the service employees and there is no exception. 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. Besides, you should also make sure that the report contains all the tips received monthly. You should be aware that some of the employees might not be able to submit the reports and it is upon you to make sure that it is done. As a result, you will be able to get accurate figures for tax reasons.
Besides, the minimum law requirement also expect the employers to ask for more frequent report than that. This is because employers need to update their tip record daily. You find that this is necessary for the employers to have precise data for tax reasons.
The next thing is that employers are required to withhold the relevant taxes and make reports to the IRS. You find that this process can be overwhelming when done manually and you can best do it using an online paystub generator. 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.