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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 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 or 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: 11/17/2016

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?

Yes. Employers in industries where tipping is common know that they must report and pay taxes on tips employees report to them. However, many employers don't realize that they're liable for the employer share of social security and Medicare taxes on tips employees don't report to them.

Rev. date: 11/17/2016

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

No.

Rev. date: 11/17/2016

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

Yes.