What is the FICA Tip Credit?

FICA is the federal payroll tax in the U.S. Each time an employee receives a paycheck, money is deducted (FICA) to apply toward the funding of Medicare and Social Security. Every business in the United States pays into FICA, even solopreneurs.

The FICA Tip Credit allows restaurants and bars to receive a deduction on the taxes owed on tips.

The IRS estimated prior to the FICA Tip Credit, only about 15% of tip income was being reported.  The FICA Tip Credit was designed to incentivize businesses to accurately report tip income.

Without the FICA Tip Credit, your restaurant or bar could pay a large amount in payroll taxes, due to larger tippers. Therefore, we highly recommend claiming the FICA Tip Credit each year. If you have an unused FICA Tip Credit, it can be carried over for up to twenty years or until your credit has been used completely.

Who is Eligible for the FICA Tip Credit?

You may be eligible for the FICA Tip Credit if your restaurant or bar has employees who received tips from customers for providing, delivering, or serving food or beverages where tipping is standard and your business paid employer Social Security and Medicare taxes on those tips, your business may be eligible for the FICA Tip Credit.

Find out if your business is eligible for the FICA Tip Credit by calling or texting us now at (310) 616-3240 or email Craig@TaxCapBusiness.com.