Tips and Wage Expense on Schedule C

Forum|Forum|5 years ago
April 7, 2021
1 reply
4 views

Wage expense states that it should be equal to Box 1 of the W3 form. HOwever Box1 includes reported tips. Reported tips should not be an expense should they? As the business owner, i did not pay that to the employee, the customers did. I did pay FUTA and social Security, medicare, etc on the tip amount. But, i dont get to claim all reported tips as an expense do I?

Am i missing something here? Do i need to have the reported tips offset, perhaps by showing the reported tips as income as well?

TurboTax Home & Biz Windows

Best answer by LudwigVan_fan

It shouldn't be. Wages paid by you do not include tips received by the employee. They report them to you so that FICA can be withheld from other wages on those tips.

Just keep good records.

LudwigVan_fan

Alumni - Champ

Hi:

No, wage expense for line 26 should be the gross wage paid to the employee. If the employee reports tips to you for purposes of FICA taxes, that is different than the wage you actually paid the employee.

See instructions for Line 26; salaries and wages

https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

Wage expense equal to Box 1 of the W-3 would not be accurate for tips reported but not controlled by the employer.

**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**

DanG91Author

Level 3

@LudwigVan_fan so perhaps the software is saying it needs to be equal to box1, but not meaning in the instance if you have employees who receive tips? This will not be a "red flag", having the two amounts not be equal?

LudwigVan_fan

Answer

Alumni - Champ

It shouldn't be. Wages paid by you do not include tips received by the employee. They report them to you so that FICA can be withheld from other wages on those tips.

Just keep good records.

**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**