Tefra tip reporting Form

Tefra tip reporting Form: What You Should Know

As a follow-up to “What Employers Need to Know about Reporting Income Tax on Tips,” a new tip income tax form, W-2G, is now available. Tip Pooling How to Establish Tip Pooling Rules If a pooling or sharing system is provided to the employee or employees, it does not reduce the employer's obligation to report the amounts it collects under the FLEA or to withhold and withhold only the federal tip credit amounts. However, the employer must pay the applicable taxes or share the amount with the IRS. Tax Reform The IRS issued its proposed reforms to the FLEA under the Tax Equity and Fiscal Responsibility Act (TERRA). TERRA proposes certain reforms to the reporting of tip income to reduce, but do not eliminate, the incidence of non-payment of federal income tax on tips. These are some of the most popular changes: Effective April 11, 2017, employers with 5 or more employees will be required to report their tip income to the IRS on Forms W-2G. This is effective at the beginning of 2017. The employer will also be required to pay any taxes due for tips on the form. Effective April 26, 2017, employers with 16 or more employees will be required to report tip income to the IRS on the forms if the employer uses a payment and/or pooling system, but does not pay or share the amount with the IRS. Effective April 25, 2018, employers with 16 or more employees will be required to report tip income to the IRS on the forms if the employer uses a payment and/or pooling system, but does not pay or share the amount with the IRS. Effective April 26, 2018, employers who engage in tips-based or shared valuation will be required to report and pay additional tax on the amounts of tips their employees receive. Existing employers will still be allowed to report their tips via a payment or pooling system. The final rule on payment and reporting of tips states: “Employers that participate in a tip pool or share with their employees may be required to file Form W-2G or Form W-8. These forms establish the tips received by the employee during the time period covered by the reports.” Effective February 2, 2018, employers who engage in a system of tips-based valuation for all of their employees and all tips above the minimum wage will also be subject to payroll system reporting requirements. Existing employers will still have the option to report these amounts if they wish.

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