What Is the FICA Tip Credit? Five Things for Restaurants to Know About an Often-Missed Tax Credit
Modern Restaurant Management
MARCH 30, 2023
The FICA Tip credit (FICA stands for Federal Insurance Contributions Act) is a federal income tax credit that was enacted to offer financial relief to businesses in the food service industry that has employees who receive part of their wages through tips given by customers. The tax credit was originally designed to deter businesses from hiding or underreporting tip income and prevent an unintended financial burden on those businesses for their share of the FICA tax on reported tips.
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