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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 for social security and Medicare taxes 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 dependent care assistance, should the employer's contribution be reported in box 10 of Form W-2?

Rev. date: 02/27/2013

As an employer, do I have any liability for social security and Medicare taxes if my employees receive tips but don't report them to me?

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

Rev. date: 04/10/2013

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?

No.

Rev. date: 12/21/2012

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

Yes.