How to Report Tips on Form W-2 for your Restaurant Employees
In every restaurant across the United States, customers providing tips for serving the foods, beverages, etc., to the employees and it is the most common thing in the country.
The tips paid to the employees are generally for food and beverages served within the restaurant. The tips paid includes:
Charged Tips (Credit and Debit Card tips in the gross receipts)
Cash Tips received directly from the customers
Tips received through the tip-sharing arrangements between the serving employees
Restaurants Employers facing a few challenges when it comes to paying taxes & reporting employee tips.
Reporting of Tips by Employees:
An employee needs to report tips greater than $20 to the employer by the 10th of the month following the month of receiving the tips. This can be done through Form 4070. This includes cash tips, tips you receive from other employees, and debit and credit card tips.
Reporting of Tips by Employer:
A Restaurant employers would include the reported tips of the employees through their Form 4070 as part of the income and withholding for each employee in the Form W-2, Wage and Tax Statement.
For the Federal income tax, the income of wages, tips and other compensation for the employee is taken into account. (Reported on Box 1 of Form W-2)
Social Security tips - Report the tips that the employee reported to you even if you did not have enough employee funds to collect the social security tax for the tips. (Reported on Box 7 of Form W-2.). However, the social security wages and social security tips are reported separately
Allocated Tips - If you operate a large food or beverage establishment, report the tips allocated to the employee. (Reported on Box 8 of Form W-2)
Medicare Wages and tips - Report the total amount of earnings you paid to the employees you subject to Medicare tax. There’s no limit on the amount of wages that might be subject to Medicare tax. (Reported on Box 5 of Form W-2)
Also there is a more conditions in reporting the tips on the Form W-2. The IRS/SSA rejects your Forms if you made the mistakes on Form W-2. Error free filing of the Form W-2 could be done when you choose to file w2 online through IRS-authorized e-file providers like expressirsforms.com.
ExpressIRSForms - Helps Restaurant Owners to file W-2 without any Hassle
Employers in Restaurant can e-file Form W2 in few steps by following the simple step by step filing process. The cloud based Software also take care of printing & mailing the copies of W2 Forms to your restaurant employees on time on behalf of you.
Deadline for the 2018 Tax Year to File Form W-2 with the IRS/SSA is on January 31, 2019. To avoid penalties begin your Filing now with ExpressIRSForms before the due date.
With ExpressIRSForms, you can also file the other federal tax forms 940, 941/944, 940/941 Schedule R, 1099, 1095 and extension forms as well.