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Tips Against Minimum Wage

Tips Against Minimum Wage and FICA Tax Credit #

Overview #

This article explains two important features in the Employer Set-up Page-3 of ProPay:

  1. Check Here To Apply Tips Against Minimum Wage
  2. Credit For FICA Taxes Paid On Excess Tips

These features are designed to help employers manage tipped employees’ wages and calculate tax credits related to FICA taxes on excess tips.

Feature Details #

Check Here To Apply Tips Against Minimum Wage #

When this box is checked, ProPay will:

  • Warn you when a tipped employee’s gross pay falls below the State’s minimum wage.
  • Ask if you want to increase the employee’s pay rate (for that paycheck only) to meet the State’s minimum wage requirements.
  • Compare the employee’s pay rate against the State’s minimum wage during paycheck entry.
  • Offer the option to increase the employee’s pay rate for any paycheck to meet the State’s minimum wage requirements.

Credit For FICA Taxes Paid On Excess Tips #

When this box is checked, ProPay will:

  • Automatically calculate any over-paid FICA & MEDICARE taxes on EXCESS FICA TIPS.
  • Take into account the FEDERAL MINIMUM WAGE in these calculations.
  • Display these calculations in the last 3 columns of the Taxable Wages Report under User Defined Reports.

FICA Tax Credit Calculation #

ProPay uses the following formula to calculate the FICA tax credit:

  1. Tips deemed to be wages = (Total hours X Fed Minimum wage (5.15)) – (Gross – Tips)
  2. Excess FICA tips = Regular tips – Tips deemed to be wages
  3. FICA Tax Credit = Excess tips X (FICA + MEDICARE rate)

Using the FICA Tax Credit Information #

The figures from the Taxable Wages Report can be used to fill in Form 8846 “Credit for Employer Social Security and Medicare Taxes Paid on Certain Tips.”

Troubleshooting #

If you encounter issues with these features:

  1. Verify that the correct boxes are checked in the Employer Set-up Page-3.
  2. Ensure that all employee information, including hours worked and tips received, is accurately entered.
  3. Double-check the state and federal minimum wage rates in your ProPay settings.

Additional Information #

For more detailed information on Tips Against Minimum Wage regulations in your client’s state, please contact the State Department of Labor.

For a full explanation of the FICA Tip Tax Credit calculation, refer to the separate help topic in ProPay.

How to Access Help #

Customers can access our help menu through:

  1. The ProPay payroll software
  2. Our website: https://www.Paysoft.com

Feedback #

We value your input! If you have any suggestions for improving this article or questions that weren’t addressed, please contact our support team through the ProPay software or our website.