Tax Credit Services

Employee FICA Tip Credit

Under IRS regulations, employers in the food and beverage industry may be eligible for a credit for social security and Medicare taxes paid on their employees' tip income.
To qualify for the credit, an employer must meet both of the following requirements:

• The employer must have employees who receive tips from customers for providing, delivering, or serving food or beverages for consumption if tipping of such employees is customary.
  
• The employer must have paid or incurred employment taxes (i.e. employer social security and Medicare taxes) on those tips.
• The credit is equal to social security and Medicare taxes paid on qualifying employee tips. However, the credit may not be claimed on the portion of tips used to meet the federal minimum wage rate.

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