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Hiring Employees Kastrup luxury hotelsTips your employee receives are generally subject to withholding.Your employee must report cash tips to you by the 10th of the month after the month thetips are received. The report should include tips you paid over to the employee for chargecustomers and tips the employee received directly from customers. No report is requiredfor months when tips are less than $20. Your employee reports the tips on Form 4070,Employee's Report of Tips to Employer, or on a similar statement. The statement must besigned by the employee and must show the following:
Both Forms 4070 and 4070-A, Employee s Daily Record of Tips, areincluded in Pub.1244, Employee's Daily Record of Tips and Report toEmployer. You must collect income tax, employee social security tax, andemployee Medicare tax on the employee's tips. You can collect these taxes from theemployee's wages or from other funds he or she makes available. Stop collecting theemployee social security tax when his or her wages and tips for tax year 2000 reach$76,200; collect the income and employee Medicare taxes for the whole year on all wagesand tips. You are responsible for the employer social security tax on wagesand tips until the wages (including tips) reach the limit. You are responsible for theemployer Medicare tax for the whole year on all wages and tips. File Form941 to report withholding on tips. If, by the 10th of the month after the monthyou received an employee's report on tips, you do not have enough employee funds availableto deduct the employee tax, you no longer have to collect it. Show these tips and theuncollected social security and Medicare taxes on Form W-2 and on lines 6c,6d, 7a, and 7b of Form 941. Report an adjustment on line 9 of Form 941 for the uncollectedsocial security and Medicare taxes. If an employee reports to you in writing $20 or more of tips in amonth, they are subject to FUTA tax. Allocated tips. If you operate a large food or beverageestablishment, you must report allocated tips under certain circumstances. However, do notwithhold income, social security, or Medicare taxes on allocated tips. A large food orbeverage establishment is one that provides food or beverages for consumption on thepremises, where tipping is customary, and where there are normally more than 10 employeeson a typical business day during the preceding year. The tips may be allocated by one of three methods - hours worked,gross receipts, or good faith agreement. For information about these allocation methods,including the requirement to file Form 8027 on magnetic media if 250 or more forms are filed, see the separate
Publication 15 Circular E, Employer's Tax Guide |
