If your restaurant has employees who receive tips on a regular basis, you may be eligible for the FICA Tip Credit.
Employers are required by law to pay taxes on tips received by employees as these are defined as income under the Federal Insurance Contributions Act. Both employees and businesses must pay FICA taxes on tips.
If your wait staff receives tips and you have not taken advantage of the FICA Tip Credit, you are leaving significant tax savings on the table. The credit is equal to the employer paid FICA taxes on income above the federal minimum hourly wage and could result in thousands of dollars in tax savings.
The FICA tip credit was intended so businesses that employ staff members who earn tips can recover most of the money paid for taxes. Restaurant owners that take advantage of this tax credit can minimize their payroll taxes and increase their overall cash flow.
Restaurant owners must request this tip credit on their business tax returns. Taxpayers must file Form 8846 – to claim the credit. Consult with your CPA and Payroll providers regarding the FICA tip credit, to ensure you are maximizing your FICA Tip Credit and increasing the cash flow for your business.
If you need help with restaurant taxes in Charlotte, call one of our CPAs for more information. They have years of experience with restaurant accounting, and will be able to identify areas for savings.
Camuso CPA PLLC offers comprehensive services to develop and tailor a first-rate tax plan for your business needs. Reach out to our team regarding any questions about FICA Tip Credit or establishing a comprehensive tax plan.
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