I have searched the forum for this answer and found a similar question from 2009 by BHoffman, but I did not find a response. I don't do payroll and I have no other clients with businesses where employees receive tips, so I am researching.
I see where there is a penalty of 50% of the social security, Medicare and other taxes to the employee for not reporting tips to the employer.
My client owns a hair salon. I do not do the salon accounting and Paychex does the payroll without any input from me.
Client's expense sheet for the tax return I am preparing lists over 25K as "Employee Reimbursement" under expenses. She states this is tips to the employees and cashback that was included in the gross income on the CC and debit card transactions and the gross income amount she reported to me. I see from her W-3 that there are no tips reported through payroll because there is nothing in boxes 7 or 8. She states the employees handle their own tips. She keeps petty cash and when a tip comes through, the tip money is given to the employee.
If the employees are not reporting their tips to my client is this a problem for my client/employer since it shows on CC transactions?
I am not auditing her books. If I tell her to not include the tips given to the employee and the cash back to the customer in her gross income, is this a problem for me?
Thank you so much for any information you can provide.
I see where there is a penalty of 50% of the social security, Medicare and other taxes to the employee for not reporting tips to the employer.
My client owns a hair salon. I do not do the salon accounting and Paychex does the payroll without any input from me.
Client's expense sheet for the tax return I am preparing lists over 25K as "Employee Reimbursement" under expenses. She states this is tips to the employees and cashback that was included in the gross income on the CC and debit card transactions and the gross income amount she reported to me. I see from her W-3 that there are no tips reported through payroll because there is nothing in boxes 7 or 8. She states the employees handle their own tips. She keeps petty cash and when a tip comes through, the tip money is given to the employee.
If the employees are not reporting their tips to my client is this a problem for my client/employer since it shows on CC transactions?
I am not auditing her books. If I tell her to not include the tips given to the employee and the cash back to the customer in her gross income, is this a problem for me?
Thank you so much for any information you can provide.
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