In June 2012 the IRS issued Revenue Ruling 2012-18, explaining the difference between a tip and service charge, and emphasizing that services charges are wages. While both service charges and tips are subject to employment taxes, there are different reporting obligations associated with each category. Also, importantly, as wages services charges do not qualify for FICA tip credit under Internal Revenue Code section 45B.
Home > Federal Law Articles > FLSA > Industries and Occupations (FLSA) > IRS Will Begin Implementing New Service Charge Rules Effective January 1, 2014