What is the FICA Tip Credit?

Absolute Pay Trust doesn't jsut save you money on your payroll and insurance.  We'll show you how to take advantage of other cost savings opportuniites such as the FICA tip credit.  If your business employs tipped employees, you are entitled to a credit against income taxes.  This credit is available only on tipped employees and is therefore commonly referred top as the "FICA Tip Credit."  The credit is figured using FICA taxes paid on reported tips and wages that exceed the minimum wage requirement.  The tax credit, formally named the 45 (B) Credit after a section of the federal Internal Revenue Code, is a "general business credit" that lets restaurateurs or other employers with tipped employees to reduce their federal income tax burden.

How to File for the FICA Tip Credit

To calculate and claim the credit, you are required to fill out IRS Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips, and file it with your federal income tax return.  You can find IRS Form 8846 in the Payroll Forms section of this website, or click here for the FICA Tip Credit form.

FICA Tip Credit Example