Taxes

What are FICA and FLSA Tip Credits?

March 3, 2022

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If you’re unfamiliar with FICA and FLSA tip credits then you may be missing out on something that can help your business, if you are in the food and beverage industry. These are set in place to effectively help businesses that pay an employment tax on their employee tips and reduce the amount of taxes owed. These rules are advantageous in business where customers pay to tip a waitress or bartender and employees who make more than $30 in tips have to report them. At Journey Payroll & HR we can set up a report for your CPA to receive at the end of the year, which will help you as the employer when filing your business taxes. Please reach out to us if you have any questions this blog can’t answer, and also let us know if you would like to be connected to a trusted CPA that understands this tax credit well.

What is the FICA tip tax credit?

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FICA tip credits give an employer a credit for the portion of social security and Medicare paid to employees that exceed Federeal Minimum Wage Requirements. FICA tip credits ultimately reduce the amount of money a business owes when it’s tax season. If you’re unsure how much money this can actually save you, there are ways to calculate tip credit just to see how much it would benefit your business and the amount of savings you would incur.

Which businesses are eligible for FICA tip credit?

If you’re unsure if your business qualifies for a FICA tip credit, keep reading to find out.

Related:  Leave Without Getting Lost: Your Road Map to the New Employer Tax Credit for FMLA Leave

All bars, restaurants, food/beverage delivery service, nail salons and similar businesses where employees earn tips qualify for tip credits. The business must have paid or incurred employer Social Security or Medicare taxes on the tips.

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Your CPA is a great resource for FICA Tip Credit Tax Questions

Journey recommends speaking with your CPA to help with any questions you may have on FICA tip credits within your overall business tax situation. Looking for CPA recommendations? Being locally owned and within your community we are able to connect you with great people!

If you have any questions on our other services such as onboarding, HR and time clocks please don’t hesitate to reach out. Your business’s growth is our mission and we will treat it like our own. We can’t wait to work with you!


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