If you run a bar or restaurant, this one's for you.........

Here's an update from last week's email below.  In the latest release of the House draft version of the new tax laws,  voluntary tips paid to a server are proposed to be excluded from income tax.  The exclusion would apply to a server whose gross income is less than $160k annually.  The exclusion only applies to income tax:  payroll tax would still be withheld.

This is important legislation not only for the server, but for you:  the owner of the business.  Under current rules,  you get a personal income tax credit on your tax return for payroll taxes paid on server tips.  This is not insignificant:  many of you get a $5k-$10k tax credit and several of you get credits closer to $100k annually.  There's no mention in the House draft of any impact the proposed legislation would have on your credits. 

I would have to assume that since the credits are based on payroll taxes and not income taxes, the credit would continue.  But as the House and Senate get into the details and deals, and how to pay for the income tax cuts,  I would assume that at some point the credit is going to come up as a source of making it all balance and work.

Stay tuned!