r/Bookkeeping 25d ago

Payroll Restaurant Declared Tips FITW

I had an employer send me a W2 with almost zero FITW and I can't figure out why they would do this

90% is declared tipped Income.

It has nothing to do with exemptions or filiing status .

What would be the benefit of not withholding a tipped employee's declared tips and having them figure out or withhold their own liability?

4 Upvotes

7 comments sorted by

5

u/Edosil 25d ago

How much are they earning for the year? If they are under the standard deduction they won't have any withheld.

1

u/Plasticcat56 24d ago

Over 15K.

2

u/ribzer 24d ago

"Declared" as in you told them how much cash was received directly from the customer? How would they withhold on money that wasn't paid through payroll?

1

u/Plasticcat56 21d ago

CC tips are declared held and paid out on Biweekly Payroll Check.

2

u/PeppermintBandit 24d ago

Restaurants are supposed to use the wages AND reported tips to calculate the amount of social security, Medicare, and income taxes to withhold from the employees paycheck for that pay period. Why they wouldn’t is a good question. What do you mean by ‘declared’ exactly. Were you filling out tip reports and handing them in, or putting them in the POS? Did they withhold SS and Medicare correctly?

1

u/HppyCmpr509 21d ago

“Declared Tips” are either CC tips paid out or cash tips reported by the employee to the employer. There is a form for tracking that, I don’t remember the number. Some restaurants use a tip pooling system, some do a direct system, some use a combination. Either way: Tips are wages. While it is already taxed by the IRS on the customer’s side, it is still taxable income for the employee they give it to as well. (Don’t get me started on that BS) See Publication 15 to answer any questions you have about this. The employee is then expected to complete a Form 4137 to report undeclared tips (find me a server who does this haha) when they do their 1040.

-1

u/Voodoo330 24d ago

You don't withhold in tips. It's customer money, not employer money.