July 2010

For more information, contact: Ann Lahde, CPA Tax Manager 920-996-1117

Are you hiring new tipped employees this year? The National Restaurant Association recently published statistics forecasting an increase in employment at eating and drinking establishments this summer season by more than 8% for twelve states, including Wisconsin.

You probably know that if your new hires qualify, you get what some are calling a “payroll tax holiday,” or the “HIRE exemption.” Specifically, you are exempt from the 6.2% employer share of social security tax on qualifying wages from March 19 through December 31, 2010. This exemption will also change your tip credit calculation.

To reflect the new rules, the IRS has revised its filing instructions for the 2009 Form 8846, “Credit for Employer Social Security and Medicare Taxes on Certain Employee Tips.” Fiscal year filers who have not yet filed their 2009 returns need to check the box on line 4 and attach a separate computation. So that the 6.2% payroll tax on tips used for the HIRE exemption isn’t double-counted for the tip credit, the calculation must show the amount of tips subject to only the Medicare tax of 1.45%.

The HIRE (Hiring Incentives to Restore Employment) Act took effect in March 2010. For more information on this topic or for assistance with the special computation, please contact Ann Lahde at 800-236-2246 or 920-996-1117, or any member of our retail industry team.

Ann Lahde is a manager in our tax group. With an emphasis on tax planning and compliance, Ann works primarily with closely held businesses in a variety of industries, and individuals. As a member of our retail team, she focuses on restaurants, bars, and other food service businesses.