TIPS ARE STILL AN ISSUE WITH THE IRS

Over the past few years the IRS has made it a concentrated effort to educate salon owners and their employees on the tax law regarding tips.  One of the salon owners greatest ally is the Professional Beauty Association.  One of the many functions that they do for you is keep an eye on what is happening in Washington DC.

Below is an email from Myra Y. Irizarry the Government Affairs Director of PBA regarding new guidance on tip reporting.  I suggest you do two things.

·         Read the guidance carefully and make sure you understand your requirements.

·         Secondly, if you are not a member of PBA, join now.  There is power in numbers and the more members the more they can do to serve you.  For more information on PBA visit probeauty.org

From: myra@probeauty.org
To: myra@probeauty.org
Date: Wed, 1 Aug 2012 11:22:47 -0700
Subject: IRS Guidance Addresses Tax Treatment of Tips Under FICA, Tip-Related Business Audits

PBA Leadership,

Please share the following information with your fellow salon owners.  Thank you!

IRS Guidance Addresses Tax Treatment of Tips Under FICA, Tip-Related Business Audits

The Internal Revenue Service released three documents June 2012 related to taxes imposed on tips under the Federal Insurance Contributions Act (FICA), audit direction relating to tips, and interim guidance on auditing businesses where tipping is customary.

Revenue Ruling 2012-18 provides guidance for employers and employees in a question-and-answer format on the taxes imposed on tips under FICA including information on the difference between tips and service charges, reporting of the employer share of FICA under tax code Section 3121(q), and the Section 45B credit.

Rev. Rul. 2012-18 http://www.irs.gov/irb/2012-26_IRB/ar07.html#d0e170

SBSE-04-0612-057, dated June 7, provides administrative guidelines to examiners auditing businesses where tipping is customary and/or where a business adds service charges to customers' bills, which are then distributed to employees.

Memorandum SBSE-04-0612-057 http://www.irs.gov/pub/foia/ig/spder/sbse-04-0612-057.pdf

Announcement 2012-25 provides administrative guidelines to examiners about Revenue Ruling 2012-18 and seeks public comments by Sept. 24 on the interim guidance and whether additional time is needed to ensure that systems are compliant.

IRS Announcement 2012-25 http://www.irs.gov/pub/irs-drop/a-12-25.pdf

 

Myra Y. Irizarry

      Government Affairs Director | Professional Beauty Association (PBA)
      15825 North 71^st Street, #100, Scottsdale, AZ 85254
      p 480.455.3451 |f 480.905.0708

PBA is a non-profit membership association. Visit probeauty.org for information.