Did you know that you may be eligible for a FICA credit if you have employees that receive tips? Each year, the 45(B) credits, which are a special IRS tax advantage, might amount to hundreds of dollars per employee. Depending on the size of your payroll and the number of employees you have, your firm could save thousands of dollars each year.

FICA Tip Credit Calculation
The illustration assumes a worker receives $2.13 per hour and works 30 hours per week. This employee reported $350 in tips for the week. The federal wage rate for the FICA tip credit is $5.15 per hour. The restaurant owner would save over $1,000 per year on this single employee in this situation. To calculate your taxes, there are various FICA tax calculators available online.

Weekly Wages = Hours Worked x Hourly Rate + Reported Tips
                         30 x $2.13 + $350 = $413.90

Wages Paid at Minimum Wage = Hours Worked x Federal Wage Rate
                          30 x $5.15 = $154.50

Tax Credit = Weekly Wages - Wages Paid at Minimum Wage x FICA
                          $413.90 - $154.50 x 7.65% = $19.84

Annual Savings per Employee = Tax Credit x Payroll Frequency
                           $19.84 x 52 weeks = $1,031.68 Savings Annually

Is my company eligible for the FICA tip credit?

You may be entitled to a 45(B) credit for just a portion of the taxes you pay on tips your employees earn if you own or manage a cafe or bar where tipping is common. The company's share of FICA income tax paid on tip earnings over the federal minimum wage, which is 7.65%, is equal to the corporate credit. You can receive this money as a business tax credit on your company tax return by filling out IRS Form 8846 and sending it with your federal income tax return.