Payroll and Reporting of Employee Tips

[peggysioux]

I handle payroll for a restaurant and restaurant manager had a new system installed to track dailysales and payroll. The person who installed system advised manager that employees only had to report tips reported on credit cards as that is all that could be tracked. While I know that is incorrect and I advised the manager that employees should report ALL tips to employer, I was curious if other tax preparers have run into this same scenario. Also, I interviewed another restaurant this week to possibly begin handing their books and payroll and they advised me that their CPA that currently handles their books and payroll advised them also that they were only required to report the credit card tips. It seems to me that I am in the minority on how tips are to be reported.

[geekgirldany]

I can't find anything that says that other than credit cards are a paper trail for the IRS and some servers do not report cash tips or only report a certain percentage so not to get caught. There should be a way to enter cash tips into their computer system to track along with credit card tips.

[TAXNJ]

You win

I handle payroll for a restaurant and restaurant manager had a new system installed to track dailysales and payroll. The person who installed system advised manager that employees only had to report tips reported on credit cards as that is all that could be tracked. While I know that is incorrect and I advised the manager that employees should report ALL tips to employer, I was curious if other tax preparers have run into this same scenario. Also, I interviewed another restaurant this week to possibly begin handing their books and payroll and they advised me that their CPA that currently handles their books and payroll advised them also that they were only required to report the credit card tips. It seems to me that I am in the minority on how tips are to be reported.

Reference link below

http://www.irs.gov/taxtopics/tc761.html

[TAXNJ]

Another

Another reference. You maybe a super star

http://hospitalityguild.com/GuidePro/Management/Taxtips.htm

AND ANOTHER SIMPLE REFERENCE

http://www.fmblodget.com/Tips%20on%20Tips.pdf

[BHoffman]

Tips are a PITA, both for bookkeeping and tax prep. I think they are included on the 1099K forms.

I can't believe how many tax returns I've seen from other preparers who did not "bother" with form 8849. Hero status when amending and getting back thousands of dollars

[TAX4US]

how would handle report of cash tips that when you figure the FICA amount there is not enough base pay to collect all that is due. I have seen this happen.

[TAXNJ]

How

how would handle report of cash tips that when you figure the FICA amount there is not enough base pay to collect all that is due. I have seen this happen.

How?

How would you handle?

[Lion]

There are codes for that on the W-2 (maybe M and N) that mean the tax gets paid with the employee's income tax return.

[Burke]

how would handle report of cash tips that when you figure the FICA amount there is not enough base pay to collect all that is due. I have seen this happen.

There are 3 links posted in this thread, and at least one of them covers this.

[Mo Sheets]

Tips

I do the bookkeeping for two restaurants. Both restaurants have their employees show "declared" cash tips + charged tips = total tips. I verify the employees are making minimum wage (hourly rate + tips = at least minimum wage) and we add to their paycheck a flat sum, based upon the shortfall when they do not meet the minimum wage requirement. I complete Form 8846 for both employers so they receive credit for the Social Security and Medicare taxes paid on the employee tips.

[Zee]

Great Responses to poster's question

Another reference. You maybe a super star

http://hospitalityguild.com/GuidePro/Management/Taxtips.htm

AND ANOTHER SIMPLE REFERENCE

http://www.fmblodget.com/Tips%20on%20Tips.pdf

TaxNJ - Great references for the poster! I've been reading this forum for years, and have always been most impressed with the ethics of the posters!! It is unfortunate that others choose a different route and make it difficult to retain and obtain clients that concentrate only on the answer that gives them the result they want. Sigh... But, that's how it is and probably always has been.

[TAXNJ]

Thanks

TaxNJ - Great references for the poster! I've been reading this forum for years, and have always been most impressed with the ethics of the posters!! It is unfortunate that others choose a different route and make it difficult to retain and obtain clients that concentrate only on the answer that gives them the result they want. Sigh... But, that's how it is and probably always has been.

One should know when to walk away if it's not right.

Yes, this free site provides a valuable tool for many related to tax issues offering suggestions, comments, etc. BUT not the final authority since we are not RESPONSIBLE for preparing the return scenario in any post. Rather offering where one may, if they want, research information that maybe related to their specific scenario.

Also, as it relates to the preparation in support of tax returns, a former Tax Professor once stated years ago to the students "always cite your source for support of the return because your signature is on the return ....." . Very valuable reminder for the students studying taxation and those in the taxation field.