Bank finance articles and tips

In addition to all of the subjects covered in enrolled agent training for helping individuals, several important tax matters are addressed for advising business owners. A most important area is tip reporting. Employers bear considerable responsibility regarding tip income.

Employees are supposed to report to their employers the total tips received in a calendar month as long as the amount exceeds $20. Tips of less than $20 per month are still taxable income that employees should reveal to their tax return preparers. However, tax practitioners with an enrolled agent education possess additional knowledge to help the employing businesses.

Employers are required to include the figures on a tip report in calculations for withholding of income tax as well as Social Security and Medicare taxes. When tips are particularly large, this withholding can significantly affect net paychecks. Businesses are responsible for payment of both the employee and employer portions of Social Security and Medicare taxes. Employees may pay their parts to employers from the tips collected.

When wages are insufficient for withholding of the taxes due on both wages and tips, a business owner should obtain expert advise from an enrolled agent search. IRS rules cover a specific order of applying available withheld amounts. Income tax withholding on regular wages is the first priority. This is followed by Social Security and Medicare taxes on regular wages. The final significance is rendered to all tax withholding associated with reported tips. Employers can deduct an accrual of required withholding from subsequent paychecks.

Important enrolled agent jobs involve assisting in preparation of W-2s by businesses with tip reporting. The rules for employers are complicated. Firstly, any required withholding that is uncollected due to insufficient paychecks is reported in a special box on the employee's W-2. This should match the adjustment amount on employer quarterly federal payroll tax reporting using Form 941.

The W-2 box for wages should include reported tips. In addition, the boxes for Social Security wages and Medicare wages should include reported tips. When reported tips are less than 8 percent of gross receipts, most food and beverage businesses must record the deficiency as allocated tips. These business operations file a special annual return for tip income and allocated tips. An important element of advice provided by a professional with EA certification is that allocated tips by employees are indicated in a special box on each W-2. No withholding is required on allocated tips.

As the IRS escalates enforcement of compliance with tip reporting rules, businesses in industries such as food and beverage as well as casino gaming are wisely turning to enrolled agents for help. Consequently, EA study of issues related to tip income results in opportunities to provide needed services.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

Fast Forward Academy is a leading publisher of education for enrolled agent training and tax professionals. Access to free questions for the enrolled agent education is available on their website.

By Sawyer Adams
Article Source: http://EzineArticles.com/?expert=Sawyer_Adams