![\"IRS](\"https:\/\/old.visionpayroll.com\/kb\/wp-content\/uploads\/2013\/11\/20131120.jpg\")
<\/a>IRS Says Restaurants Must Change Tip Reporting in 2014<\/p><\/div>\n
Effective January 1, 2014, restaurants and other employers with tipped employees must change the way certain tips are reported. Although Rev. Rul. 2012-18<\/a> took effect in 2012, examiners in some circumstances could apply it to amounts paid after December 31, 2013. Therefore, all employers must comply with Rev. Rul. 2012-18<\/a> starting in 2014.<\/span><\/p>\n Payments Traditionally Treated as Tips Must Now Be Treated as Service Charges<\/span><\/b><\/p>\n Certain payments that tipped employees receive and employers called tips must now be treated as wages. Since these wages are subject to withholding, they should be paid in the employee\u2019s paycheck. Although there is a line on Form 941, Employer\u2019s QUARTERLY Federal Tax Return<\/a>, to report the uncollected employee share of social security and Medicare taxes on tips, there is no line to report such uncollected taxes on wages or service charges treated as wages. In order to collect and pay these taxes, therefore, the service charges should be paid on the employee\u2019s paycheck.<\/span><\/p>\n Employer\u2019s Characterization of Amounts as Tips Is Not Relevant<\/span><\/b><\/p>\n The Internal Revenue Service (IRS)<\/a> states that it is irrelevant whether or not the payment is called a tip. According to the IRS<\/a>, \u201cthe absence of any of the following factors creates a doubt as to whether a payment is a tip and indicates that the payment may be a service charge.\u201d The four factors listed are the following:<\/span><\/p>\n Mandated Tips and Suggested Tips<\/span><\/b><\/p>\n Examples provided by the IRS<\/a> distinguish between mandated tips and \u201csuggested\u201d tips. In the former case, the menu dictates that an 18% gratuity will be added for parties of six or more. Since the amount is added to the charged amount by the employer and the customer did not have the unrestricted right to determine the amount, this payment is considered wages, not tips. Alternatively, if the check simply shows sample tips amounts of 15%, 18%, and 20% and the customer chooses one of the suggested tip amounts, the amount is still considered a tip for payroll tax purposes.<\/span><\/p>\n Service Charges Should Not Be Reported as Tips<\/span><\/b><\/p>\n Employees are generally required to report cash tips (including amounts paid on credit cards and received in a tip-sharing arrangement) to their employers, and those cash tips are included in gross income of the employees. Amounts determined to be wages and not tips under these provisions should not be included in the amounts reported to employers.<\/span><\/p>\n Contact Vision Payroll if You Have Questions on the New Rules on Tips<\/span><\/b><\/p>\n Be sure to contact Vision Payroll<\/a> if you have further questions on Rev. Rul. 2012-18<\/a> and the new rules on tip reporting.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" Effective January 1, 2014, restaurants and other employers with tipped employees must change the way certain tips are reported. Although Rev. Rul. 2012-18 took effect in 2012, examiners in some circumstances could apply it to amounts paid after December 31, 2013. Therefore, all employers must comply with Rev. Rul. 2012-18 starting in 2014. Payments […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[1761,528,321,37,38,28,635],"_links":{"self":[{"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/posts\/7198"}],"collection":[{"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/comments?post=7198"}],"version-history":[{"count":3,"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/posts\/7198\/revisions"}],"predecessor-version":[{"id":7205,"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/posts\/7198\/revisions\/7205"}],"wp:attachment":[{"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/media?parent=7198"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/categories?post=7198"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/old.visionpayroll.com\/kb\/wp-json\/wp\/v2\/tags?post=7198"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n