By law, restaurant employers are required to pay taxes on the tipped portion of an employee’s earnings since they are defined as income through the Federal Insurance Contributions Act (FICA).
Restaurant employers are entitled to a credit for the Social Security and Medicare taxes that are paid on employees tipped income. To qualify for the credit, establishments must have employees that receive tipped income from serving food for consumption, delivering or serving beverages, and the establishment must have incurred or paid Social Security and Medicare taxes on the tipped portion of the wages.
To take advantage of this credit, employers need to request the FICA Tax Tip Credit on their tax returns. The tax credits could account for credits equating to hundreds of dollars per employee per year.
While owning a building seems like something every successful business should do, that’s not always the case. For many companies, it makes more sense to continue leasing space, freeing up time and capital that can be better utilized in other ways.
Big Fish Payroll Services can provide the necessary reporting to help recover those credits.