6. Tips Tips your employee receives from customers are generally subject towithholding. Your employee must report cash tips to you by the 10th ofthe month after the month the tips are received. The report shouldinclude tips you paid over to the employee for charge customers andtips the employee received directly from customers. No report isrequired for months when tips are less than $20. Your employee reportsthe tips on Form 4070, Employee's Report of Tips toEmployer, or on a similar statement. The statement must be signed bythe employee and must show the following: The employee's name, address, and SSN. Your name and address. The month or period the report covers. The total tips. Both Forms 4070 and 4070-A, Employee's Daily Record ofTips, are included in Pub. 1244, Employee's Daily Record ofTips and Report to Employer; available from the IRS. You must collect income tax, employee social security tax, andemployee Medicare tax on the employee's tips. You can collect thesetaxes from the employee's wages or from other funds he or she makesavailable. (See Tips treated as supplemental wages insection 7 for further information.) Stop collecting the employeesocial security tax when his or her wages and tips for tax year 2000reach $76,200; collect the income and employee Medicare taxes for thewhole year on all wages and tips. You are responsible for the employersocial security tax on wages and tips until the wages (including tips)reach the limit. You are responsible for the employer Medicare tax forthe whole year on all wages and tips. File Form 941 to reportwithholding on tips. discount hotels in Dresden If, by the 10th of the month after the month you received anemployee's report on tips, you do not have enough employee fundsavailable to deduct the employee tax, you no longer have to collectit. If there are not enough funds available, withhold taxes in thefollowing order: Withhold on regular wages and other compensation. Withhold social security and Medicare taxes on tips. Withhold income tax on tips. Show these tips and any uncollected social security andMedicare taxes on Form W-2 and on lines 6c, 6d, 7a, and 7b of Form941. Report an adjustment on line 9 of Form 941 for the uncollectedsocial security and Medicare taxes. Enter the amount of uncollectedsocial security and Medicare taxes in box 13 of Form W-2 with code A.(See section 13 and the Instructions for Forms W-2 andW-3.) If an employee reports to you in writing $20 or more of tips in amonth, the tips are subject to FUTA tax. Note: You are permitted to establish a system for electronic tipreporting by employees. See Proposed Regulations section31.6053-1. Allocated tips.If you operate a large food or beverage establishment, you mustreport allocated tips under certain circumstances. However, do notwithhold income, social security, or Medicare taxes on allocated tips. A large food or beverage establishment is one that provides food orbeverages for consumption on the premises, where tipping is customary,and where there are normally more than 10 employees on a typicalbusiness day during the preceding year. The tips may be allocated by one of three methods--hoursworked, gross receipts, or good faith agreement. For information aboutthese allocation methods, including the requirement to file Forms 8027on magnetic media if 250 or more forms are filed, see the separateInstructions for Form 8027.