Tax Credits Available to Restaurants through the IRS FICA Tax Tip Credit

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.

Big Fish Payroll Services can provide the necessary reporting to help recover those credits.