What are social security tips, and how should employers report them on tax forms?

[soren]

We have tipped employees in our workforce and want to make sure we're reporting their earnings correctly. Social security tips refer to the tip income employees report to their employer, which is subject to Social Security and Medicare taxes just like regular wages. Employers are required to withhold FICA taxes on reported tips and include them in Box 7 of the W-2. Are there common mistakes your payroll team has run into when handling tip reporting for hourly tipped workers?

 

[wellow]

Social security tips are employee tips that are subject to Social Security and Medicare taxes, typically cash tips over $20 per month reported by workers. Employers must withhold payroll taxes and report tips on Form W-2, including allocated tips in Box 8, and include them in Form 941 filings returns.