The FICA Tip Credit (IRS Code Section 45B) is a dollar-for-dollar tax credit that reimburses employers for the FICA taxes (Social Security and Medicare) paid on employee tips above the federal minimum wage. This is not a deduction—it directly reduces your tax liability, providing immediate cash flow benefits to your business.

The credit equals 7.65% of tips reported by your employees that exceed the federal minimum wage. For a restaurant with 20 servers averaging $200 in weekly tips, this can mean over $20,000 per year in tax credits. We can also claim retroactively for up to 3 years, potentially resulting in a substantial refund.

If you own a restaurant, bar, hotel, or any hospitality business where employees receive tips, you're likely eligible. The business must have employees who receive tips that are reported to the IRS, and you must pay FICA taxes on those tips. There is no minimum size requirement—businesses with just a few tipped employees can qualify.

The credit is calculated as 7.65% (the combined FICA tax rate) of the tip income that exceeds the federal minimum wage. The formula is: (Total reported tips - (Federal minimum wage × Total hours worked)) × 7.65%. Our team handles all these calculations to ensure maximum accuracy and benefit.

Yes, you can claim the FICA tip credit retroactively by filing amended returns for up to 3 years. This means if you've never claimed this credit before, you could receive a substantial refund for prior tax years. Our team specializes in maximizing these retroactive claims.

When properly documented, claiming the FICA tip credit does not increase your audit risk. Our process ensures all claims are thoroughly documented and compliant with IRS requirements. We maintain a 100% compliance rate and stand behind every claim we process.

While most firms take months, our streamlined process typically gets you funded within weeks. After you provide the necessary information, our team handles everything, and you can expect to receive your credit in 4-8 weeks in most cases. For retroactive claims, the timeline may be slightly longer.

We need your business tax returns (Form 1120, 1120S, or 1065), payroll reports showing tip income (Form 941), Form 8027 (Employer's Annual Information Return of Tip Income), and Form 8846 if you've previously filed for the credit. Don't worry if you don't have everything—our team will guide you through exactly what's needed.

We work on a contingency basis—you pay nothing upfront. Our fee is a percentage of the credit we secure for you, so we only get paid when you get your money. If we don't get you a credit, you pay nothing. This risk-free approach aligns our success with yours.

The FICA tip credit can be claimed alongside other tax incentives like the Work Opportunity Tax Credit (WOTC) and Employee Retention Credit (ERC). However, you cannot claim FICA tip credit on the same wages used for other wage-based credits. Our tax specialists will optimize your overall tax strategy to maximize all available credits.

Yes, when claiming the FICA tip credit, you must reduce your wage deduction by the amount of the credit claimed. However, this is still highly advantageous as a dollar-for-dollar tax credit provides more benefit than a deduction. Our analysis will show you the net benefit specific to your tax situation.

The FICA tip credit is based on reported tips only. We can help implement tip reporting best practices to ensure you're maximizing your credit while maintaining compliance. Improving tip reporting benefits both your business (through increased tax credits) and your employees (through increased Social Security benefits).