Social Security Tax on Tips

[Burke]

Employer reported tip income in Box 7 for employee. Gross income is in Box 1, Box 3 shows Soc Sec wages without tips, and Box 5 shows Medicare wages with tips included. Box 4 shows SS tax on reduced amt, and Box 6 shows MC tax withheld on gross amount. Is this correct?

[TaxGuyBill]

No.

Box 1 should include tips.
Box 3 should NOT include tips.
Box 5 should include tips.

Box 4 should have had SS withholding on entire amount (box 3 plus box 7). But amount might not add if employer deferred SS taxes for employee under the Presidential thingy.
Box 6 should have withholding on entire amount.

[Burke]

No.

Box 4 should have had SS withholding on entire amount (box 3 plus box 7). But amount might not add if employer deferred SS taxes for employee under the Presidential thingy.t.

That's what I thought. Apparently employer must have deferred SS; so next year it will show up? What if she quit?

[TaxGuyBill]

If the employer deferred SS, yes, it would show up on next year's W-2.

If she quits in 2021, the employer may take any remaining amount due from her last paycheck, so it would still show up on the 2021 W-2.

If she had quit in 2020 with no paychecks in 2021 ... that is a good question. :-)

[rbynaker]

If it's "Presidential thingy" deferred then it shows up on a corrected W-2 (Form W-2c) for 2020 which we probably won't see until at least January 2022 (if ever).

From the IRS website:

https://www.irs.gov/forms-pubs/form-w-2-reporting-of-employee-social-security-tax-deferred-under-notice-2020-65

The original IRS Notice:

https://www.irs.gov/pub/irs-drop/n-20-65.pdf

And the follow-up IRS Notice when Congress decided to drag this out for the entire year:

https://www.irs.gov/pub/irs-drop/n-21-11.pdf

If the employee quit and the employer was unable to withhold enough from the last paycheck, they "make arrangements to otherwise collect" the previously deferred taxes from the employee. I'm envisioning a dark alley and a baseball bat.

Rick

[TaxGuyBill]

Oh yeah, thanks Rick, I forgot about the W-2c.

Don't you love my precise terminology about the "Presidential thingy" :-)

[Burke]

If it's "Presidential thingy" deferred then it shows up on a corrected W-2 (Form W-2c) for 2020 which we probably won't see until at least January 2022 (if ever).
If the employee quit and the employer was unable to withhold enough from the last paycheck, they "make arrangements to otherwise collect" the previously deferred taxes from the employee. I'm envisioning a dark alley and a baseball bat.Rick

Well, TP did quit in 2020. It was just a summer job. So will not have income from employer to recover uncollected SS taxes in 2021. I have explained situation and TP will let me know if anything is received from them.