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IRS.gov Website

Frequently Asked Tax Questions

Small Business/Self-Employed/Other Business - Form W-2, FICA, Medicare, Tips, Employee Benefits

  1. As an employer, do I have any liability if my employees receive tips but don't report them to me?
  2. If the reported tips from employees of a large food and beverage establishment are 8% or more of sales, must an employer still allocate tips to the employees?
  3. When an employer provides day care assistance, should the employer's contribution be reported in box 10 of Form W-2?

Rev. date: 1/1/2011

As an employer, do I have any liability if my employees receive tips but don't report them to me?

Employers in industries where tipping is common know that they must pay the employer share of social security and Medicare taxes on tips which employees report to them. However, many employers do not realize that they may be liable for the employer share of these taxes on tips employees do not report to them. For tips which the employees did not report to the employer, the employer’s liability does not arise until the Service issues a Section 3121(q) Notice and Demand.

Rev. date: 1/1/2011

If the reported tips from employees of a large food and beverage establishment are 8% or more of sales, must an employer still allocate tips to the employees?


Rev. date: 1/1/2011

When an employer provides day care assistance, should the employer's contribution be reported in box 10 of Form W-2?

Yes.