What are Some of the Legal Issues With Employee Tips
One thing that you should know about is that majority of employees in the service industry receive tips. Because of that employers need to have a report of this for tax purposes. If you read more, you will realize that tips are the difference between poverty and financial comfort. Because of that tip income will also be relevant to employers. The challenging part with people who employ people who depend on tips is that they don’t know a lot of obligations concerning those tips. The big question is whether you have to report these tips or not. If you read more here, you will discover more legal issues with employee tips.
One thing that you should know as an employer, you are required by the law to report employee tips. Thus not all, but there are multiple reporting rules in this area that you should be aware of before anything else. One of the rules is that employees are required to report all their cash tips to the employer if their monthly cash tip is more than twenty dollars. Besides, you should know that these reports are supposed to be made by all the service employees and there is no exception. But it will be important to organize with all your employees so that they can all report the tips.
Besides, employers are also supposed to collect employee tip reports. Besides, you should also make sure that the report contains all the tips received monthly. Remember that it is possible that some of the employees can fail to submit the tip report and you have to make sure that it is done. This way you will be able to get accurate figures for tax reasons.
The other thing is that the employers are also allowed to request more frequent reports than that as a minimum requirement by the law. The reason being that employers need to update their tip report daily. You find that this is necessary for the employers to have precise data for tax reasons.
This should be followed by withholding the pertinent taxes and make reports to the IRS. This process is tedious and challenging and you can easily expedite it using an online paystub generator as opposed to the manual process. You should also know that employers are supposed to withhold the relevant income and tip income as well as FICA taxes as they do with regular earnings.
Finally, employers also must match the amount paid by the employees in FICA taxes as in the case with regular income. These directives and more should be followed by the employers to display the element of responsibility and to be compliant with the law.