The IRS today released Internal Revenue Bulletin 2012-26 providing guidance on how taxes are imposed on tips under the Federal Insurance Contributions Act (FICA). The bulletin is in question-and-answer format and includes an explanation of both the employer’s and employee’s obligations. The bulletin also addresses the following issues:
— The difference between a tip and a service charge for FICA purposes
— What tips must be reported to an employer
— How tips are reported by the employee to the employer
— Liability for unreported tips
IRS Bulletin 2012-26 is available here.