How are attributed tips treated?
In general, attributed tips are treated as wages for purposes of withholding, reporting and payment of FICA, FUTA and income tax withholding. The employer must treat tips attributed to the participating employees as if each such employee had reported those tips to the employer. Thus, the employer must comply with the applicable legal requirements to withhold, pay, and report FICA, FUTA and income tax. Attributed tips are also reported as wages on the Forms W-2 furnished to participating employees. Tips attributed to nonparticipating employees are not treated as wages for FICA, FUTA and income tax withholding purposes and are not reported on the Forms W-2 furnished to nonparticipating employees. Nonparticipating employees must report the amount of tips actually received to the employer, and the employer must treat the amount of reported tips as wages.
