Overview
Lisa Rudisel is a guest author at ORBA.
Overview
Lisa Rudisel is a guest author at ORBA.
Blogs
TEFRA! TEFRA! READ ALL ABOUT IT!
TEFRA (The Tax Equity and Fiscal Responsibility Act) was instituted to produce additional revenue through a combination of federal spending cuts, tax increases and reform measures. One of the areas targeted is reporting tips by employees of food and beverage establishments. According to the IRS, approximately 16% of total tip income is being reported by restaurant and bar employees. Obviously, that is a lot of money in taxes not being collected.
The restaurant industry is truly unique in that employees are more often than not bringing home most of their earnings as cash at the end of each work day. Of course, along with this comes a little bit of complexity when calculating payroll taxes on these wages.
When an employee’s net wages from their hourly salary are not enough to cover the withholdings on the taxes paid on their cash tips, this is known as a shortfall. And if not tracked properly, can lead to a big problem and leave you with more than a sinking feeling.
Are You Leaving Money on the Table?
How often do you see your employees leaving cash on the table? Never, right? No sooner have their guests left than the cash is swept up and into the abyss of their pockets. But you as a restaurant owner are leaving money on the table if you are not claiming the FICA Tip credit.
