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Tips and Gratuities

Employer Responsibilities for Tip-Based Compensation

By Employment Law, Tips and Gratuities

If you employ people in positions that commonly receive tips or gratuities, it’s important to stay abreast of your responsibilities as an employer. Requirements for taking tip credits The current federal minimum wage is $7.25 per hour; employers may claim a tip credit to pay $2.13 per hour if employees make up the difference through tips. If an employee doesn’t make enough in tips to reach minimum wage, the employer must make up the difference….

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Tips on Tips: Understanding Requirements for Reporting Gratuities

By Tips and Gratuities, Withholding Taxes

For employers with employees who rely on tips as part of their income – restaurants, hair and nail salons, other service industries – it’s important to understand gratuities and how the Internal Revenue Service (IRS) expects them to be reported. Is there a difference between tips and gratuities? A gratuity can take the form of either a tip or a service charge. Tips are discretionary (optional or extra) payments that a customer gives to an…

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