Running a restaurant is tough—long hours, rising costs, and tight margins. But what if you could unlock a tax credit that helps offset some of your payroll expenses?
If you employ tipped workers, you may be eligible for the FICA Tip Credit, a federal tax credit designed to reduce the taxes you owe on the tips your employees receive. Many restaurant owners miss out on this opportunity simply because they don’t know about it. Here’s what you need to know:
What Is the FICA Tip Credit?
The FICA Tip Credit allows restaurant owners to claim a tax credit on the employer-paid portion of FICA taxes (Social Security and Medicare) for tips earned by employees that exceed the federal minimum wage. Since restaurants must pay payroll taxes on all wages—including tips—this credit helps offset some of that tax burden.
Who Qualifies for This Tax Credit?
If you operate a restaurant or hospitality business where employees earn gratuities, you likely qualify. The key requirements include:
- Your business must have employees who receive tips.
- You must have paid FICA taxes on those reported tips.
- The credit applies only to tips above the federal minimum wage ($7.25/hour).
How Much Can You Save?
Let’s say your staff earns $100,000 in tips over the year. As an employer, you’re responsible for paying 7.65% in FICA taxes on those earnings—amounting to $7,650 in payroll taxes. The FICA Tip Credit allows you to claim that amount as a dollar-for-dollar tax credit, reducing your overall tax bill.
How to Claim the Credit
- Track Tip Income – Ensure accurate tip reporting through payroll systems.
- Complete IRS Form 8846 – This form helps you calculate and claim the credit.
- File With Your Tax Return – Work with your accountant or tax professional to ensure compliance.
Why This Matters for Your Restaurant
Every dollar saved can be reinvested into your business—whether it’s upgrading equipment, improving employee benefits, or simply increasing your bottom line.
At Mopac, we believe in helping restaurant owners thrive. Just like we provide reliable, hassle-free used cooking oil collection, we also want to make sure you’re maximizing every opportunity to reduce costs.
If you weren’t aware of the FICA Tip Credit, now is the time to talk to your accountant and ensure you’re not leaving money on the table!
📌 More info: IRS FICA Tip Credit
