You find that majority of employees in the service industry receive tips. Because of that employers need to have a report of this for tax purposes. 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. 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.
First of all, you required by the law to report employee tips. But it is vital to know that there are multiple different reporting rules in areas that you should be aware of. 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.
The next one is that employer is also required to report employee tip reports. This should include all the tips collected 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. 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. 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. One thing that you should know is that filling paystubs manually and you can best execute this process using an online paystub generator. Besides, the employers are also required to withhold the relevant income and tip income as they do with regular earnings.
Finally, employers also must match the amount paid by the employees in FICA taxes as in the case 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.