In most businesses, employees work for wages paid at regular intervals. But in many service-oriented entities, employees receive much, sometimes nearly all, of their income in the form of tips, or gratuities. But that doesn’t mean this income is tax free — which is why the IRS has outlined special rules in Topic 761 – Tips – Withholding and Reporting.
First, companies should make sure their employees are aware that they can use Form 4070A, Employee’s Daily Record of Tips, to keep a daily record of their tips, and Form 4070, Employee’s Report of Tips to Employer, to report their tips to their employer. (Look for these on the IRS website in “Publication 1244, Employee’s Daily Record of Tips and Report to Employer.”) An in-house electronic system for tip reporting may also be acceptable.
After getting the report, employers can use the data to figure the amount of Social Security, Medicare and income taxes to withhold for the pay period on both wages and reported tips. Even though staff may be paid mostly in tips, employers are still responsible for paying the employer’s portion of the Social Security and Medicare taxes.
Employers should collect employees’ portions of these taxes from the wages paid, or from funds the employee gives the owner. If the employer doesn’t have enough money from the employee’s wages and funds that the employee gives the owner, the employer should withhold taxes in the following order:
Preparing the Form W-2
Again, employing a tip-based staff does not give employers a free pass when it comes to preparing the annual Form W-2. It must include wages, tips and other compensation in the box labeled “Wages, tips, other compensation.”
Employers must include Medicare wages and tips and Social Security tips in their respective boxes. When employers figure out the liability for federal unemployment tax, they should add the reported tips to the employee’s wages.
Finally, certain establishments above a certain size (generally employing more than 10 people whose combined hours are more than 80 hours in a typical business day) must file Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, for each calendar year, and may be required to allocate tips to their employees.
These are just the key rules. Tip-based businesses should read the full IRS guidance and consult with a qualified financial professional. Contact McVay Business Services and we’ll be happy to go over your operations and take a closer look at your payroll and HR needs! 850-725-5696
What is a PEO?
A Professional Employer Organization (PEO) is a human resource outsourcing company designed to assist small, medium and large size businesses to concentrate on their own business by taking on the headaches of payroll, workers compensation and human resource management.
Are you a staffing company?
No. Integrity Employee Leasing leases your own employees back to you and manages all payroll taxes, workers compensation, benefits and human resources.
Do I still have control over my employees?
Yes. Because this is a co-employer relationship you still manage and control your business. We do not hire, fire or set wages, benefits or schedules for your individual business. All of these functions remain in your control while we take on the liability for the payroll and workers compensation.
What do I pay for your service?
In the majority of cases our service is not only free but actually saves money over the current way you are doing everything we do. Because of our buying power we can show you significant savings and still take away the work and worry you presently have for a lot of your employee needs.
How do I get started?
With a little bit of information about your company we can do a free proposal. If you decide to use our service we have kept it very simple. All we do is get you approved for Workers compensation, have each employee fill out a small packet, set up your payroll and we are ready to go. The only responsibility you have is to call or fax your hours to our office, we process your payroll and call you with one total. We then deliver your payroll to you and collect one check for the entire thing. It is that simple!
What day is payday?
Your payday is our payday. We deliver payrolls Monday through Friday and it is based on when you want your payroll and what day you want it dated for. We do weekly, bi-weekly, and semi-monthly and even some monthly payrolls.
Are PEOs licensed?
Yes. We are licensed and regulated by the Florida Department of Business and Professional Regulation. We report quarterly all of our financial information and are audited annually.
What other benefits do you offer?
We handle all workers compensation and unemployment claims, pay all appropriate payroll taxes and answer any Human Resource questions you may have. We also provide you with a safety program and risk management. In addition we put you in position to offer major medical, dental and a wide variety of supplemental benefits.
If I use your service who do I call if I have a question?
You will be assigned one processor to take care of your account. Because we use only real receptionists you will always be put through to a live person to answer your question or solve your problem.
Can you give me references?
Because Integrity Employee Leasing prides itself on excellent customer service we would be more than happy to give you a list of references when we meet you. We feel our clients are our best advertisement.
Traditional Payroll and Employee (PEO) leasing Services 850-725-5696
What Types of Companies Use PEO's? Companies in almost every industry use the services provided by a PEO. Any company interested in trying to improve its performance in an increasingly competitive marketplace should consider this type of partnership.
We are active partners with Integrity Employee Leasing Inc. Full service PEO providers.
Some of the major advantages many companies have discovered are:
Professional Employer Organizations (PEOs) are becoming increasingly popular for small business owners who want to compete with larger companies by offering various kinds of benefits without the administrative grunt work. Fit Small Business belongs to a PEO to provide employee benefits, so we have first hand experience on the pros and cons and process of joining a professional employer organization.
Call Mike McVay, Payroll Agent at 850-725-5696
Nothing can be more stressful than finding out you owe the IRS when calculating your taxes when you already are struggling. The issue of course, is even though you can’t pay the tax, you still must file your tax return by the deadline. This video reviews some options you can employ if you are caught in this situation.
We can file I.R.S. form 9465 Installment agreement for you. There is a 49.00 I.R.S processing fee and all penalties and interest do apply, however this is a great way to stay compliant and not have a huge payment lingering over you. Call Mike McVay, Tax Accountant for help in this area.
I.R.S Link to form 9465 - https://www.irs.gov/uac/about-form-9465
Mike McVay, Tax Accountant Blog
Certified QuickBooks ProAdvisor & Licensed Tax Accountant Pensacola, FL
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