Waitress W2

[Possi]

tip income

I was just searching "tip" income on the board and I see that there was some confusion about reporting tips.

Enter the W2 exactly as it is. Social Security tips need no special treatment.

If there are ALLOCATED TIPS in box 8, the 4137 will come up.

Restaurants must report a certain percentage of tips to sales. (8%)

If the staff doesn't report the minimum tips to sales, the restaurant must "allocate" tips, or "force" tip income on the staff.

If the establishment's tips are routinely low, the staff (client) can get around reporting "allocated" (Box 8) tips, and we as preparers do NOT need to include them on the w2 IF A DAILY TIP RECORD has been kept by the client to prove the allocated tips are not true.

Also is true with "tipping out" or sharing tips at the end of the night. Tip records must be kept if the client is not reporting "allocated" tips from the W2.

I hope this helps. I'm not often much help here, but I am familiar with this topic.

This is from the IRS website:

Question: Of my allocated tips, I tip-out 15% to the busboy and 5% to the bar. Where do I deduct this on my tax return?

Answer: You cannot deduct tip-outs (the tips you split with other employees) on your tax return. Nor can you deduct them from your allocated tips:

*
The practice of tipping-out is one of the reasons you should keep a detailed daily log of your tips.
*
If you documented that you tip-out, and you reported all your tips to your employer, then you do not include in your income the allocated tips in box 8 of Form W-2 (PDF).

Tipping-out, by itself, should not cause an allocated tip situation:

*
When you report the cash tips you receive, you should first report the total tips, then the amount tipped-out. Publication 1244 (PDF), Employee's Daily Record of Tips and Report to Employer, includes Forms 4070 and 4070A, Employee's Report of Tips to Employer that provides lines to record:
o
Cash tips received
o
Credit card tips received
o
Tips paid out
o
Net tips
*
The detail of the information provided should enable your employer to develop a reasonable, fair, and accurate method for determining whether tips need to be allocated, and, if so, how much.
*
Employers who operate large food and beverage establishments are only required to allocate tips if the total tips reported by all the employees who customarily receive tips are less than 8% of gross sales.
*
When there is a tip-splitting arrangement, it is important that all tips, including those received through tip-splitting, be reported to the employer by each employee who receives $20 or more in a month.

~possi

[BHoffman]

Hey, I just remembered. I have a good buddy who prepares payroll for living and does W2s for restaurant employees. He will probably know! I'll ask him in the morning.

[Gene V]

I been getting these W2’s like BHoffman got for a long time—I just look at some this year, already got 4 and all from different restaurant.
Will have to check with some payroll company and see why they issue them this way.

[BHoffman]

JG - that's what has me stumped. I could understand if I saw something in box 12 code a, but there isn't anything. That may be an error on the W2, but the withholding percentage math works out OK. How weird this is....perhaps a nice bowl of ice cream is in order.

[JG EA]

I think you are correct. However, I'm wondering if this is the result of any error or not. I don't think so. I think the employee reported tips to the employer, and the actual paid wage amount was insufficient to cover the SS withholding.

I figured this was some easy and common thing that you all had seen a million times!

I believe that would be a box 12 entry Code A and B and then the employee would pay on his tax return.

Commom: For SS/Med to be wrong but not off by $186.

[BHoffman]

Sandy - thanks for your advice. I think box 4 is correct. I think the wages paid to the employee were insufficient to pay the SS on the employee's reported tips. Still trying to sort this out. Thanks you guys for helping.

[S T]

I am not sure

B

I worked the W-2 figures in my software program and arrived at the same numbers for SS and Mcare, and my program did not alert me to do anything in regards to filing form 4137, etc.

SS came up 434 and Mcare came up the 145, based on box 3 and box 5, my software automatically does the SS and Mcare calc and then I can override if need be.
I entered 3,000 for box 7 and nothing changed.

I even tried to manually do a 4137, and it still reported -0-
I entered 12a and software entered UT = 186 on line 60

I found a W-2 on one of my clients that had the same type of reporting as yours. That
W-2 for box 4 = SS amount calculated on Box 3 + Box 7

Maybe you should call the t/p's employer and ask why box 4 isn't being calculated correctly.

Sandy

[BHoffman]

I think you are correct. However, I'm wondering if this is the result of any error or not. I don't think so. I think the employee reported tips to the employer, and the actual paid wage amount was insufficient to cover the SS withholding.

I figured this was some easy and common thing that you all had seen a million times!

[Gene V]

I hate to say this, but I’ve been getting W2’s like this for years, never anything in box 12, I just been entering numbers as they appear on the W2-client has never paid any additional tax. I don’t do payroll—so don’t know if this is proper reporting.

[JG EA]

I don't think you have to do anything except report the SS and Med as shown on the W-2. If too much was reported the employee should ask for a refund because too much was taken from their check. If too little was taken from their net check then the employer accidentally paid too much when filing 941's or the like. The employee has nothing to pay to the IRS, it has been paid already.

[BHoffman]

I checked my data entry and it is correct. Still wondering what to do. Thanks for posts.

[WhiteOleander]

Box 7: Social Security tips. Box 7 reports the amount of tip income that you reported to your employer. If you did not report tips to your employer, you will not have an amount in this box. The amounts in Box 7 and Box 3 should add up to the amount in Box 1, or the $90,000 maximum wage limit for Social Security taxes.

Box 7 shows the amount of tips reported by employees. In many situations, the cash wages paid are insufficient to collect the entire amount of social security and Medicare tax. Reported tips must still be shown in this box, even if social security or Medicare tax was not withheld on them. For 2008, the combined total of Boxes 3 and 7 cannot exceed $102,000. The reported tips should be included with amounts reported in Box 1, wages, tips, other compensation and Box 5, Medicare wages and tips. Since social security benefits are based on the amount of social security tips reported to the Social Security Administration (SSA), it is important that employees periodically review their social security earnings record and provide the SSA with the Form W-2 to update any incorrectly posted earnings records


I found these paragraphs from differnts sites when I googled.

This is from the general instructions for W-2, W-3's on the IRS site.

Box 7—Social security tips. Show the tips that the employee reported to you even if you did not have enough employee funds to collect the social security tax for the tips. The total of boxes 3 and 7 should not be more than $102,000 (the maximum social security wage base for 2008). Report all tips in box 1 along with wages and other compensation. Include any tips reported in box 7 in box 5 also.

[BOB W]

a pizza shop, a business which usually doesn't bother with such niceties as proper tip
reporting.

I'm betting at year's end the W2 preparer asked for the information so that the W2
could be properly prepared.

The W-2 was completed wrong and the additional $186 needs to be paid by the taxpayer or have the employer correct the W-2.

[ChEAr$]

The business is

Look again at box 4 on the w-2 and compare it with your computer screen for box 4. Screen must match W-2. W-2 probably says $620. If so, put $620 in computer for box 4.

a pizza shop, a business which usually doesn't bother with such niceties as proper tip
reporting.

I'm betting at year's end the W2 preparer asked for the information so that the W2
could be properly prepared.

[BOB W]

I think I can't find the answer because the question is so basic.

I have here a W2 from a gal who worked for a Pizza Inc. She was a tipped employee.

Box 1... 10,000 Wages, tips
Box 2....... 900 FWH
Box 3..... 7,000 SS wages
Box 4........ 434 SS WH
Box 5.... 10,000 Med wages
Box 6........ 145 Med WH
Box 7...... 3,000 SS Tips

There are no amounts in box 12

Seems like Client should pay SS tax on the amount in Box 7, but I don't know where to put it. Can some kind and patient person help me out with this? I admit this is my first tipped client. This has to be so simple.

Thank you very much.

Look again at box 4 on the w-2 and compare it with your computer screen for box 4. Screen must match W-2. W-2 probably says $620. If so, put $620 in computer for box 4.