"Someone mentioned I should be applying for the FICA tip credit. Can you explain what the credit is and how to get it?"
With the FICA tip credit, if you own a restaurant you have to pay there is a lower minimum wage for your wait staff who is also working on tips believe it's 260 $3.63 currently and so we're you know, there's a higher federal minimum wage of, you know, 10 or $11 an hour. You can pay a lower hourly rate to your tip or Your wait staff because they're also working on tips. But you also have to make sure that the tips they receive, when added to the hourly rate, get them to at least minimum wage. You pay social security and Medicare on tips that exceed the minimum wage.
For example, if you pay waitstaff $2.63/hour and they make $15/hour in tips, then you're going to pay the employer Social Security and Medicare on the full amount that they made. The FICA tip credit says "you only had to guarantee them minimum wage and so we will give you a tax credit for the Social Security and Medicare you pay in excess of the minimum wage.
The IRS does stipulate that you have to maintain daily tip records in detail. So you've got to be able to show how much tips employees made each day if you claim this credit. At the end of the year you'll file form 8846 and will calculate that credit. If you own a restaurant and it's not something you're taking advantage of you really need to look into it because it can be quite a significant tax savings.
If you have any questions about your business, text them to me at 501-762-0116.
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