Employee Tip Reporting For Bars & Restaurants

If you own a restaurant or bar, please read on.................

The annual tip reporting form will be due to IRS next February. On that form, the amount of tips your servers reported during 2021 will be reported. Also reported will be your 2021 sales. IRS wants to see that at least 8% of sales were reported as tips. If that report doesn't show at least 8%, you can be subject to additional reporting to IRS and may have to "allocate" the shortfall to all servers, by amending their W2 (employee income) forms. This is a complicated and costly process and if possible, should be avoided.

I point this out now, so that if your tip % is under 8%, you have an opportunity between now and 12/31 to increase what's being reported.

If you have questions, please let us know.