Client Tip for June 2017: DIFFERENCE BETWEEN TIPS AND SERVICE CHARGES
DIFFERENCE BETWEEN TIPS AND SERVICE CHARGES
The IRS is reminding employers about the difference in reporting of tips and service charges. Tips are amounts that a customer voluntarily pays to an employee. The payment must be discretionary and can be paid in the form of cash, credit, or debit card. A service charge is a fee that is added to a customer’s bill that the customer is required to pay. Service charges can be for items such as delivery charges, a required charge (e.g., 18%) for tables of six or more, room service, etc. Service charges are typically mandatory. Tips must be reported by the employee to the employer who then must withhold taxes (e.g., FICA and Medicare) for this income from their standard pay. Service charges are reported by the employer as regular wages.
HBC SUMMER OFFICE HOURS
As we have for the last several years, our offices will be closing at 4:00 p.m. on Fridays from Memorial Day through Labor Day. We hope this can allow our employees to spend more time with their families after the long hours during our busy season. We wish our clients and friends a safe and enjoyable summer.
“Plans are nothing; Planning is everything.”
Dwight D. Eisenhower – 34th President of the
United States from 1953 – 1961