Tax Tips for the Restaurant Employer

As an employer, you have multiple responsibilities regarding employee tip income. You must maintain the tip reports of your employees, withhold their income taxes and their portion of Social Security and Medicare taxes, and then report all of this information to the IRS, as well as report your (the employer) income taxes and share of Social Security and Medicare taxes.

You first need to receive the record of tips from your well-trained employee.  After your employee has reported the tips she has received via written statement, you must verify the accuracy of her report. Assuming she has been staying on top of her tip count and her report is legitimate, you can then begin inputting her figures to withhold her income taxes and her share of Medicare and Social Security taxes on IRS Form 941, Employer’s QUARTERLY Federal Tax Return.  Though it isn’t withheld from employee wages, you are also responsible for filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax…