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[Video] Maximize Savings with the FICA Tip Credit: A Service Industry Guide

March 7th, 2024 | 1 min. read

By Jack Wang

Maximize Savings with the FICA Tip Credit: A Service Industry Guide

Watch this 2-minute video

In the competitive food and beverage sector, 'high employee tips' often mean 'high FICA taxes' for employers. However, the FICA Tip Credit emerges as a significant opportunity for savings, transforming tax challenges into benefits.

Understanding FICA Taxes and Tip Credit Benefits

FICA taxes, which fund Social Security and Medicare, are applied to all wages, tips included. The FICA Tip Credit is a tax provision allowing employers to claim a credit for the full 7.65% of FICA taxes paid on employee tips. This not only reduces tax liability but also promotes accurate tip reporting among staff.

Eligibility Criteria for Claiming the Credit

To be eligible for the FICA Tip Credit, your business must be a food or beverage establishment where tipping is customary. It's essential that your employees report their tips and that you've fulfilled your FICA tax obligations on these earnings.

Calculating Your FICA Tip Credit

The process involves identifying the total reported tips, calculating the portion of tips exceeding the federal minimum wage, and applying the 7.65% FICA tax rate to these excess tips. Accurate calculation is key to maximizing your credit.

Claiming Your Credit: Compliance and Record-Keeping

To claim the FICA Tip Credit, maintain detailed records of all tips, adhere to tax calculation requirements, and file the appropriate forms timely. Proper documentation and compliance are crucial for a successful claim.

Expert Guidance from Combined

Navigating the complexities of the FICA Tip Credit can be daunting, but with Combined's team of payroll specialists, you're supported every step of the way. We're here to help you understand the credit, ensure compliance, and maximize your tax savings.

Maximize Your Savings Today

Leverage the FICA Tip Credit to turn tax liabilities into savings. Contact Combined for expert assistance and start enhancing your bottom line.


This video is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Viewers should contact legal counsel for legal advice.