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. For that matter, it is vital that employers should have a report of this for tax reasons. Besides, tips are regarded as what creates the difference between poverty and financial comfort. Because of that tip income will also be relevant to employers. You find that when you employ who depend on tips, you may not be aware of more about your reporting obligations regarding these tips. Now what is remaining is knowing if the employer is supposed to report tips. If you read more here, you will discover more legal issues with employee tips.
To start with, you should understand that the law requires you 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. The first rule is that employees have to report all of their cash tips to their employers if it exceeds twenty dollars. Besides, you should know that these reports are supposed to be made by all the service employees and there is no exception. One important that you will do as an employer is finding a way in which you make all your employees responsible when it comes to reporting tips.
Apart from that, the employer is also required to collect employees’ tip reports. You should also make sure that the report includes 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. As a result, you will be able to get accurate figures for tax reasons.
Besides, the minimum law requirement also expect the employers to ask for more frequent report than that. This is because employers need to update their tip record daily. This is important in making sure that they have accurate figures for tax reasons and accuracy.
The next thing is that employers are required to withhold the relevant 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. Besides, the employers are also required to withhold the relevant income and tip income as they do with regular earnings.
To sum up, employers must also match the amount paid by the employees in FICA taxes as they do with regular income. The best way of being compliant with the law is by following the tip regulations.